Credit Suisse Rescue Creates a Private Banking Superpower

UBS – the world’s largest private bank as measured by client assets under management (AuM) – announced its emergency acquisition of Credit Suisse on March 19, 2023, hoping to end the expanding bank crisis. While the deal is troubling for several reasons, in terms of the private wealth management space it creates a superpower that could dominate the industry.

The combination of Switzerland’s two leading banks creates a combined private bank with almost $4trn in client AuM as of the end of 2022 or 6.2%* of the HNW market as measured by GlobalData’s Wealth Markets Analytics. While on paper this move looks like a fairly neat solution with minimal government intervention, it is likely to cause significant competitive issues. The combined Swiss bank’s nearest private wealth rivals Morgan Stanley (with 2022 global AuM of $1.7trn) and Bank of America (with 2022 global AuM of $1.4trn) would only equal 78% of its private wealth AuM taken together. Julius Baer – the closest Swiss bank competitor – ended 2022 with $458.6bn.

These are all impressively large client portfolios, but are vastly dwarfed by the combined UBS/Credit Suisse. In the US, where Credit Suisse has no onshore wealth management presence, Bank of America, Morgan Stanley, and other leading local private banks are sizable enough to challenge the combined entity. Yet outside of the US the disparity in size is glaring, and within the Swiss market competitive issues are unavoidable. The combined AuM of Credit Suisse’s and UBS’s Swiss operations was $779bn at the end of 2022, while their nearest rival Julius Baer managed $64bn from Swiss-domiciled clients (the best approximate comparison).

The forced merger solves the immediate crisis at Credit Suisse. However, there will be a cost in terms of competition in the private wealth management space – especially in Switzerland. Could we see selected divestments or ‘managing down,’ beyond the strategy alluded to in UBS’s announcement of the Credit Suisse acquisition? At present, there is no way of knowing. But the fundamental loss of competition will need to be addressed by regulators and competitors alike as they weigh up strategic decisions in 2023–24.

*As measured against the liquid assets of HNW investors, although it should be stressed this is only an indicative measure of market share due to slightly different assets begin measured. UBS’s and Credit Suisse’s client AUM contain a fair amount of private assets that are not counted in GlobalData’s liquid (and public) asset value, for example, while the banks do not compete in all of the 73 markets covered by GlobalData’s Wealth Markets Analytics.

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