UBS Rejects Spinoff And Keeping Credit Suisse’s Domestic Banking Assets In-House

The USA was in the grips of a full blown banking crisis just six months ago. Runs of never before seen magnitude on Silicon Valley Bank, First Republic and others led to a crisis of confidence in our regional banks. The news cycle moves on though and all of that seems forgotten now.

Interestingly, one of the largest casualties was actually overseas and UBS (UBS) acquired Swiss rival Credit Suisse for the bargain price of just 3B Swiss. Combining two domestic banks led to intense political pressure and although initially opposed, in April it seemed that UBS was planning on spinning off Credit Suisse’s Swiss banking operations.  The bank seems to have been in better shape than expected though and in fact, UBS has since even turned down the government’s loss protection agreement in a signal that it got a great deal.

No surprise then that there has been a change in its spinoff plans as well. During its recent Q2 earnings call UBS said that there will be no spinoff and instead it will merge Credit Suisse’s Swiss banking operation into its own, citing the need for integration. The feeling is a standalone bank ‘would have struggled as a separate entity, with low profitability and a substantial funding gap.’ Now it will be merged into the larger company which of course means that job cuts are expected, with 1,000 in the merger and 2,000 in other Credit Suisse businesses.

The biggest takeaway from here is that often the best times for a deal in the market is when everyone else is panicking.

Disclosure: Author holds no shares in any company mentioned.