These are the strengths and weaknesses of giant UBS.

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Acquiring CS is a huge task for UBS. Two completely different cultures collide. Both banks have different strengths and weaknesses. Look classify.

Conservative UBS bankers face a high CS risk appetite

UBS has significantly reduced its risks over the past 15 years. For example, the bank gives 77 percent of customer deposits as loans. CS follows a riskier strategy with 88 percent.

Conclusion: With the takeover, UBS is now taking more risks. “However, I expect the bank to lower the figures again in the medium term so that it can return to the old range,” says Peter Berger (60), an analyst at Basler Kantonalbank (BKB).

Great power in wealth management

UBS is already strong in wealth management. At the end of 2022, it managed assets of approximately 3.7 trillion francs. The superbank, including Credit Suisse, will become heavyweight, with about five trillion francs in client assets under its management. This puts it in the eleventh place worldwide.

The result: The two banks complement each other regionally in asset management: UBS is strong in its US business. Credit Suisse in Latin America and Asia. “And there, especially among very wealthy clients,” says Peter Berger. But in CS a large number of clients are currently in danger of skipping.

Investment bank just eats profit

UBS’ investment banking (IB) has long been a troubled child. The department is making a loss and consuming profits from other lines of business. And now the problem is even greater: Along with Credit Suisse, a large investment department has been added that has been generating huge losses for years.

Result: UBS Chairman Colm Kelleher (65) announced that Credit Suisse’s IB will shrink. At the same time, UBS writes in an article on the CS acquisition that the IB department in the US will be strengthened. Kelleher comes from classic investment banking and seems to want to continue to be involved in this prestigious field. “The areas that UBS will focus on in the future will be decisive. Depending on the situation, the risks may still be reduced,” says Peter Berger.

great no matter what

UBS has continuously improved its cost structure in recent years. The expense-income ratio will be 75.8 percent at the end of 2022. However, there is still a lot of room for improvement. With cost/revenue ratios below 65 percent, the big American banks in particular are still doing much better.

Result: With restructuring, downsizing and CS integration, costs in UBS will instantly increase significantly. The rate is likely to rise above 80% again. But in the medium term, I hope that UBS can significantly reduce its cost base,” says BKB analyst Berger. The Super Bank wants to reduce annual costs by more than seven billion francs by 2027.

Foreign bosses and poor communication

According to Peter Berger, there is room for improvement in communication at UBS as well. Along with CS is added a bank whose management has had a disastrous performance in communications in recent months. “This opened the door to speculation,” Berger says.

Conclusion: In the next few months, communication at UBS will not be the only determining factor, as the superbank represents a concentration of risk for Switzerland and UBS is currently the only major Swiss bank with international operations. This is not only problematic for the Swiss economy, but also poses a certain risk to the Swiss country.

Source :Blick