Opinion
The UBS-Credit Suisse union has unsettled private banking
Summary
- The Swiss bank merger is proving tricky in some Asian economies
Credit Suisse Group’s crown jewel is its wealth management business in Asia, judging by the tremendous personnel effort its acquirer is making. UBS Group plans to retain most of Credit Suisse’s relationship managers in the region, while cutting more than half of its smaller rival’s 45,000-strong workforce worldwide. Bonuses are being dangled for private bankers with growing client books. Singapore-based Jin Yee Young, a long-time star banker at Credit Suisse who had left for Deutsche Bank early this year, was poached back to co-head UBS’s Asia wealth business. Young’s return was good optics, a signal that UBS desires an equal partnership, at least in Asia.
Seeing the “power of two," UBS global wealth chief Iqbal Khan’s decision to retain Credit Suisse staff showcases his bet that Asia will continue to generate lucrative clients. The merger will give UBS more relationship managers than its closest rivals DBS and HSBC combined. Meanwhile, there is some synergy here. Credit Suisse’s solid client base in southeast Asia, which Khan might hope to maintain with Young’s promotion, can complement UBS’s core strength in Hong Kong and mainland China. Through Credit Suisse, UBS will also gain a presence in India and Australia.
But how do you mix oil and water? Drastically different cultures mean the two Swiss banks’ integration can’t possibly be smooth or pleasant.
First, do Credit Suisse’s relationship managers know how to pitch to clients without offering them loans? The bank has been willing to use its own balance sheet to help company founders grow their businesses, so it can win investment banking deals, such as initial public offerings, then going on to manage private wealth later. This approach has been popular with Asian tycoons and Chinese tech entrepreneurs. Before its collapse, Credit Suisse was backing mall operator Dalian Wanda Group’s ambitious turnaround plan, and Vietnamese real estate giant Vingroup’s EV dream, among others. UBS is the direct opposite. After suffering huge losses during the global financial crisis, it became a more conservative institution with lower appetite for risk. Chairman Colm Kelleher talks about “cultural contamination," worrying that some of Credit Suisse’s business models are too risky. UBS plans to dispose of billions of dollars in loans Credit Suisse had extended in Asia. This decision essentially blocks how the smaller Swiss bank built its private wealth business. And there is no guarantee of a star banker at UBS.
Second, for now, Khan is focusing on getting ‘net new money’, perhaps to compensate for the big deposit flight Credit Suisse suffered during its downfall. However, what will matter to UBS’s bottom line will be the fees private banking generates, not how big the deposit base is.
Unfortunately, Asia’s millionaires are not trading these days. After all, why take on risks when they can sit back and get 6% from one-year dollar savings accounts? Consider Singapore, a Credit Suisse stronghold. Banks there are so flush with deposits that they don’t know what to do with them. In June, Singapore’s largest lender DBS gave its central bank a $30 billion loan. Recently, United Overseas Bank lowered its fee growth forecast for the year, signalling a challenging outlook.
Once UBS’s focus shifts from net new money to fees, what will happen to the relationship managers? Is UBS showing as much commitment to Credit Suisse bankers as Nomura Holdings did to Lehman Brothers’ legacy staff in 2008, showering them with large guaranteed cash bonuses and employment? Meanwhile, inevitably, some of UBS and Credit Suisse’s private wealth businesses will overlap. So will the client go with a UBS or Credit Suisse banker? As long as there’s employment uncertainty, fast turnover will continue.
Private banking is a small world. Former colleagues are serendipitously meeting again through a shotgun marriage that neither side wanted. For instance, in the new management lineup, Adeline Chien from UBS will be “head of Hong Kong and Southeast Asia Hong Kong," while Credit Suisse’s Rickie Chan will be “head of Greater China business in Hong Kong." They were colleagues at Barclays Plc a decade ago. And Young will be working with Benjamin Cavalli again—she was his deputy at Credit Suisse.
I wonder how these bankers are feeling right now. They certainly have a tough mandate. That involves finding a way to work together, to figure out how Credit Suisse’s legacy employees can adapt to the UBS culture, while still expanding the bank’s wealth business that is set against an increasingly tough and competitive backdrop. Only time will tell. But so far, these Swiss bank expectations seem impossible to meet.
Shuli Ren is a Bloomberg Opinion columnist covering Asian markets.
