The Lex Newsletter: UBS overlap will hit Credit Suisse staff hard in Asia

Dear reader, 

It feels like business as usual at Credit Suisse’s popular annual investment conference in Hong Kong, delegates report. This is deeply surreal, they say, considering that the struggling Swiss bank has just been forcibly combined with eternal rival UBS by politicians and regulators.

The conference blurb speaks of “embracing reality” in a “lively setting designed to facilitate conversations and unlock opportunities”.

For many Credit Suisse bankers, this could involve asking other delegates for a job. The axe wielded by UBS, which shrank its own investment bank years ago, is expected to fall more heavily on Credit Suisse in Asia than elsewhere.

Notably, Ulrich Körner is not attending the event at the Conrad hotel. The chief executive of Credit Suisse may already be privately seeking new employment. UBS chair Colm Kelleher and chief executive Ralph Hamers will keep those roles at the top of the enlarged business.

UBS plans to cut the combined company’s annual cost base by more than $8bn by 2027. This would mean trimming Credit Suisse’s staffing costs by more than half.

UBS and Credit Suisse employed almost 125,000 people at the end of last year. Of those, about 23,000 are in Asia. Here, Credit Suisse operations overlap heavily with UBS. Unfortunately for Credit Suisse bankers, UBS does better in most areas.

Credit Suisse has historic strengths. Its wealth management business in Europe was one of these, although clients have recently pulled large sums in deposits.

UBS is a bigger wealth manager in Asia. Credit Suisse planned to launch a full-service wealth management business in mainland China, doubling the number of relationship managers this year. With horrible irony, Credit Suisse received regulatory approval for the move just days before its collapse.

It also won approvals for proprietary trading and an expansion of its brokerage licence to cover all of China. It had previously been confined to the southern city of Shenzhen.

Credit Suisse once had high hopes for investment banking in China. It has made only a modest impression. The group reportedly cut about a third of its China-based investment banking team and almost half of its research department in November last year.

In the equity capital markets business in Asia-Pacific, Credit Suisse ranked 20th in the league table in the first quarter, according to Refinitiv data. It has about 1 per cent of the market. UBS has remained in the top five in the past year.

UBS has been building up its client base in China for a long time. It was the first foreign bank to take majority ownership of its investment banking unit in China. The lender already has $400bn in assets in Asia.

Client overlap will be a big issue as UBS integrates Credit Suisse. Some customers holding accounts with both banks will limit their financial exposure to the combined lender by moving some of their funds to other wealth managers.

This may be a little trickier than it appears. Chinese watchdogs have just tightened regulation of the wealth management and private funds industry in an attempt to reduce market risks. Outflows from local clients have accelerated in recent months following bond volatility.

The broader financial industry in Hong Kong appears relatively resilient, despite recent US bank collapses. But risks to financial stability are continuing to grow as China’s economy slows down. China’s largest bad debt manager, Huarong, has warned of a $4bn net loss for 2022. That points to rising defaults, especially among local property developers.

Broad financial conditions and the opportunities they create are the explicit subjects of investment conferences. But we all know that networking is the main aim of many attendees. That makes Credit Suisse’s conference a hotter ticket than a star turn from prolific motivational speaker Bear Grylls would otherwise warrant.

Credit Suisse bankers, channelling their own survival skills, should make the most of the opportunity.

Enjoy the rest of your week,

June Yoon
Lex Asia editor

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