Credit Suisse woes give UBS boss chance to shine

UBS could be the bank that minimises risk, including those related to ESG issues – not the sort of thing one normally associates with Swiss banking

  
The logo of Swiss bank Credit Suisse is seen at a branch office in Zurich, Switzerland April 14, 2021.

The logo of Swiss bank Credit Suisse is seen at a branch office in Zurich, Switzerland April 14, 2021.

Reuters/Arnd Wiegmann

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

LONDON - New UBS Chief Executive Ralph Hamers has a chance to vault his institution well ahead of scandal-ridden cross-Zurich rival Credit Suisse. As he prepares to unveil results for his first full quarter in charge, opening his arms to disgruntled Credit Suisse clients and staff makes tactical sense. But a group-wide push on environmental, social and governance matters could put even more distance between Hamers and his opposite number Thomas Gottstein.

The Dutchman, who took over in late 2020, starts from a good position. UBS stock trades at a slight premium to forward tangible book value, using Refinitiv data, compared with a 40% discount for Credit Suisse. True, he has the ongoing risk of a Dutch probe into his tenure at ING, which prosecutors accused of failing to spot money laundering. But that pales in comparison with the problems facing Credit Suisse, including the collapse of clients Greensill Capital and Archegos Capital Management.

Poaching disgruntled customers is a no-brainer – particularly those investors, rich families and corporations who stand to lose money from frozen asset-management funds linked to insolvent supply chain financier Greensill. Some of Credit Suisse’s rainmakers, traders and wealth managers may also be ready to bolt. Any share-based compensation they’re owed may have gone down in value by roughly one-quarter since the end of February.

The bigger question is how to position UBS strategically vis-à-vis Credit Suisse and other peers. Hamers could try and frame his charge as everything that Credit Suisse is not. Whereas Credit Suisse’s investment bank has just blown a hole in the group’s capital ratio, for example, UBS could double down on risk-management and allocate more capital away from trading activities.

With Gottstein devoting energy to moving on from historic scandals, stretching as far back as the spying episode under predecessor Tidjane Thiam, Hamers could position UBS as a bank that embraces better practices by, for example, investing in state-of-the-art technology to improve its compliance with know-your-customer and anti-money laundering rules.

In short, UBS could be the bank that minimises risk, including those related to ESG issues – not the sort of thing one normally associates with Swiss banking. In addition, Hamers could unveil clear targets for quitting fossil fuel-linked businesses, and even incorporate them into his pay packet. As unlikely as it sounds, UBS can become Switzerland’s bank with a purpose.

CONTEXT NEWS

- A pension fund on April 17 filed a lawsuit against Credit Suisse in a U.S. court, accusing the Swiss bank of misleading investors and mismanaging risk exposure to high-risk clients including Greensill Capital and Archegos Capital Management.

- Reuters reported that the pension fund, City of St. Clair Shores Police & Fire Retirement System, based in St. Clair Shores, Michigan, filed the class action lawsuit in federal court in Manhattan, alleging violations of federal securities laws.

- Switzerland's second-biggest bank has said that the collapse of Archegos, which defaulted on margin calls, would cost it 4.4 billion Swiss francs, pushing it to a first-quarter pre-tax loss of 900 million francs.

- Additionally, Credit Suisse Asset Management funds linked to insolvent supply-chain financier Greensill hold $2.3 billion of debts owed by three clients which may be unlikely to pay: steel magnate Sanjeev Gupta’s GFG Alliance, SoftBank-backed construction startup Katerra and coal miner Bluestone Resources.

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

 (SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS http://bit.ly/BVsubscribe | Editing by Rob Cox and Karen Kwok) ((liam.proud@thomsonreuters.com; Reuters Messaging: liam.ward-proud.thomsonreuters.com@reuters.net))

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