All those involved should benefit from a spin-off of CS Switzerland.
(Photo: Reuters)
Many Credit Suisse customers have received mail these days. Or they receive a message when they log in to the app. “We are here for you,” it says. The merger with UBS is expected to be completed by the end of 2023. “Until then, Credit Suisse will continue to operate as usual.”
There are many people in Switzerland who hope that Credit Suisse will be there for them beyond that. You are like the shareholder who said at the UBS general meeting: “I never wanted to be a UBS client.”
The ongoing crisis and years of management failure make it easy to forget that Credit Suisse is a very good bank in Switzerland, for example with a digital offering that was long superior to that of UBS. The new owner of Credit Suisse would be ill-advised to destroy this value. Therefore, a spin-off of Credit Suisse’s local business is the best solution for all parties.
First of all for the UBS shareholders: your company paid a little more than three billion Swiss francs for Credit Suisse. Analysts estimate the Swiss business alone to be worth eight to ten billion Swiss francs.
Income of this magnitude, for example from an IPO, could be distributed by UBS to shareholders as a special dividend. That would calm the nerves of investors concerned about the bank’s new size – and also soothe unwilling UBS shareholders whose Credit Suisse shares were forcibly converted.
risk for the Swiss economy
A spin-off would also be cheaper for all bank customers in Switzerland: The new giant brings together around 30 percent of the mortgage market. The customer deposits of both banks add up to 330 billion Swiss francs – no other Swiss institution even comes close to this number.
Unsurprisingly, UBS management is trying to downplay competition concerns. But the fact is: UBS at least has the opportunity to play off its market power, for example by raising deposit rates a little more slowly or charging slightly higher interest rates for loans and advances. However, if another major bank is active alongside UBS, the former can use its market power to a lesser extent.
The economy is also in a better position with two large banks: the emergency merger means that small and medium-sized companies have to worry about losing an important lender. Credit Suisse has a much stronger presence in this business. Experts therefore fear that the country’s economic power will be affected. In addition, the cluster risk for the Swiss state is growing enormously as a result of the new megabank.
Even the UBS leadership around CEO Sergio Ermotti would theoretically have an incentive to spin off the Swiss business. Ermotti could present himself as a savior without having to close every second bank branch in the area. His team could also concentrate on the most strategically important tasks: winding up the investment bank and integrating asset management.
Both are highly complex tasks in and of themselves. So it seems attractive to save time by going public with Credit Suisse Switzerland and still get money for it.