Over the weekend it was discovered that UBS leadership has been considering potential merger partners, and Credit Suisse was specifically named. A like-minded Swiss firm that has already divested its US wealth management operations several years ago. The report claimed that the talks have been exploratory in nature and nothing is imminent or definitive, but this news begs a whole lot of questions.
What to make of it with respect to UBS advisors here in the US? How would a merger, of any kind, potentially affect advisors and teams that have continued to remain loyal to the UBS brand? Speculation could take this conversation anywhere, so let’s take some of UBS’ recent moves and put them in the context of a potential Swiss mega-merger.
First, there has been a tremendous amount of ‘cost-saving’ window dressing in the past couple of years at UBS (both here in the US and globally). A protocol exit was accompanied by a significant drawdown in recruiting bonus balances that sat on UBS’ balance sheet. The decision to exit the protocol meant that UBS was more comfortable litigating any move away from the firm as opposed to competing in earnest on the recruiting field of play.
Second, UBS has been furiously recruiting private bankers from Goldman Sachs, Alliance Bernstein, and even J.P. Morgan. They’ve pulled more recruits from the banking ranks than other channels so far in 2020. This is telling when you put in the context of creating a potential Swiss banking monolith that would be UBS + Credit Suisse. Where is the wealth management compensation model headed, longer-term, at UBS? If you pan out the writing seems to be on the wall.
Third, UBS is about to implement the announced comp grid changes that increase hurdles by 20% across the board to earn the same level of comp advisors have earned in the past. In other words, increasing unit profitability as the firm ‘explores potential strategies’ that could find itself either executing a mega-merger or selling different pieces of itself to meaningfully push up its value i.e. stock price (which many of you know hasn’t moved in a meaningful way in years).
The report itself comes from Bloomberg news, here is what they reported:
“UBS Group AG Chairman Axel Weber has been studying the feasibility of a mega-merger with rival Credit Suisse Group AG as part of a regular thought-exercise on future strategic options, according to people familiar with the matter.”
“UBS, the world’s largest wealth manager, has been exploring the question with consultants but it hasn’t raised the topic at the level of the executive board, the people said. The assessment is part of regular internal planning procedures and there are currently no formal discussions going on between the two banks, said the people, who asked for anonymity because the information isn’t public.”
“Both banks declined to comment. Speculation about a deal was stoked earlier Monday when Swiss finance blog Inside Paradeplatz wrote that Weber and Credit Suisse’s chairman Urs Rohner could agree on a merger as early as next year. Both banks declined to comment on the report.”Bottom line, where there is smoke there is always fire. If it isn’t a Credit Suisse merger, something else is afoot. More change is coming to UBS and it will trickle down to advisors that are employed by the firm. It will be quite interesting to see if this type of news furthers the current trend of larger teams leaving UBS for greener (and more stable) pastures.