On Breakingviews: Credit Suisse’s Swiss business is theoretically the jewel in the bank’s tarnished crown. But for UBS Chair Colm Kelleher, getting rid of his rival’s local unit may nonetheless be the least-bad option, writes LiamWardProud
linked to market share, meaning UBS may in future have to fund the combined domestic business with more capital than if the two divisions were separate.
Hiving off the Credit Suisse local unit could save Kelleher and his Chief Executive Sergio Ermotti a lot of grief. It may also generate a handsome payday, which could help speed up the rest of the merger integration. The legal entity thatmuch of Credit Suisse’s domestic business last year made about a 9% return on $14 billion of shareholder’s equity, according to Breakingviews calculations. That justifies a valuation of perhaps $11 billion, assuming a conservative 12% cost of equity.
The tricky part would be how to structure a deal. Kelleher could in theory just hand the Credit Suisse local division to shareholders, but that could prove destabilising if they all cash out immediately. Another option is to raise funds by listing a chunk of the shares, and sell the rest over time. It helps that most of Credit Suisse’s domestic business is already in a carved-out unit with its own capital and funding requirements.
True, a sale or listing would add one more complication to an already tricky deal. But it has to be simpler than a lengthy and politically fraught integration.
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