Credit Suisse Group AG’s crown jewel is its wealth management business in Asia, judging by the tremendous personnel effort its acquirer is making. UBS Group AG 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. Special bonuses are being dangled in front of 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 AG 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 the 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 the new UBS more relationship managers than its closest rivals DBS Group Holdings Ltd and HSBC Holdings Plc 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.
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 over investment banking deals, such as initial public offerings, then going on to manage private wealth later.
This approach has been popular with southeast 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 electric-vehicle manufacturing dream, among others.
UBS is the direct opposite. After suffering huge losses during the global financial crisis, it became a safer, more conservative institution with little appetite for risk. Chairman Colm Kelleher openly 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 shuts the door to how the smaller Swiss bank built its private wealth business. There is no guarantee a star banker there can shine at UBS.
Second, for now, Khan is focusing on getting “net new money,” perhaps to compensate for the massive deposit flight Credit Suisse suffered during its downfall. However, at some point, 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 percent from one-year dollar savings accounts? Consider Singapore, Credit Suisse’s 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 resorted to giving the country’s central bank a $30 billion loan. Last week, United Overseas Bank Ltd lowered its fee growth forecast for the year, signaling a challenging outlook.
Once UBS’s focus shifts from net new money to fees, what will happen to the 1,200-strong relationship managers? Is UBS showing as much commitment to Credit Suisse bankers as Nomura Holdings Inc did to Lehman Brothers Holdings Inc’s 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. Will the client go with the UBS or Credit Suisse banker? As long as there’s employment uncertainty, the 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. Meanwhile, 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 expectations seem impossible to meet.
Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. Views are personal, and do not represent the stand of this publication.
Credit: Bloomberg
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