UBS Group AG’s emergency buyout of Credit Suisse Group AG threatens to drastically shrink the financing options for small and mid-sized companies, after the demise of a 166-year-old champion of Swiss entrepreneurship.
While smaller cantonal lenders and cooperative banks offer a counterbalance to UBS in retail banking and the Swiss mortgage market, Credit Suisse has long been the market leader in serving companies’ more complex needs.
That makes the profitable Swiss unit a prized possession for UBS, with chairman Colm Kelleher saying during the announcement of the US$3 billion deal on March 19 that he was determined to hang on to the unit.
Photo: Reuters
Despite the focus by local politicians and investors on not handing one bank overwhelming power in the local market, there is little push yet from regulators to keep the Swiss business independent.
“It’s not end of corporate finance in Switzerland, but from perspective of competition, the idea of integrating Credit Suisse’s Swiss unit is not a very good one,” said Tobias Straumann, a professor of economic history at the University of Zurich. “It’s really the weak spot of this deal. Credit Suisse was the best in this field.”
Credit Suisse has been the leader in Swiss domestic investment banking activity in terms of deal value for at least a decade. That points to the role of the bank’s historical predecessor, Schweizerische Kreditanstalt, founded by railway pioneer Alfred Escher in 1856 to finance the nation’s industrial expansion.
The local unit is in many ways a miniature version of the group itself, with retail, private banking, corporate and investment bank functions.
Last year, the Swiss unit’s investment bankers led in mergers and acquisitions, as well as debt and equity-capital markets, helping raise funds for the likes of food multinational Nestle SA and pharmaceuticals giant Roche Holdings AG.
In a national poll published on Friday, a majority of respondents said they did not support the fusion of the two banks. Three-fourths of respondents said they believed that the Swiss financial sector as a whole would be weakened by the deal.
In the wake of the deal, specialty chemicals maker Clariant AG warned the takeover would reduce competition of the nation’s corporate banking services, leading to stronger pricing power for UBS in segments not well served by Switzerland’s smaller banks.
“It is certainly not good that there is now only one big bank,” Clariant said last week.
Analysts have valued Credit Suisse’s Swiss Universal Bank at about 10 billion Swiss francs (US$10.87 billion), about triple what UBS paid for the whole bank.
Clariant said that it had worked with Credit Suisse and UBS in competition, and might partner more closely with other Swiss banks in the future.
Part of the problem is that those smaller lenders lack expertise in corporate finance, Straumann said.
Swiss trainmaker Stadler Rail AG echoed Clariant’s warning on Thursday, saying the bank takeover would lead to less competition.
Stadler would have to shift more of its Swiss business to large foreign banks in the long term, which would cost local jobs, the company said.
UBS’ acquisition of Credit Suisse would provide an opportunity for foreign banks to expand into Swiss corporate finance, Straumann said.
At the same time, the pressure to spin off Credit Suisse’s local business would increase, especially with elections later this year. That might eventually push UBS to cash in on an investment that is widely perceived as harmful for its home market.
“In terms of calming international markets, it was the best solution,” Straumann said. “From the perspective of competition within Switzerland, it was second-best.”
Three experts in the high technology industry have said that US President Donald Trump’s pledge to impose higher tariffs on Taiwanese semiconductors is part of an effort to force Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) to the negotiating table. In a speech to Republicans on Jan. 27, Trump said he intends to impose tariffs on Taiwan to bring chip production to the US. “The incentive is going to be they’re not going to want to pay a 25, 50 or even a 100 percent tax,” he said. Darson Chiu (邱達生), an economics professor at Taichung-based Tunghai University and director-general of
‘LEGACY CHIPS’: Chinese companies have dramatically increased mature chip production capacity, but the West’s drive for secure supply chains offers a lifeline for Taiwan When Powerchip Technology Corp (力晶科技) entered a deal with the eastern Chinese city of Hefei in 2015 to set up a new chip foundry, it hoped the move would help provide better access to the promising Chinese market. However, nine years later, that Chinese foundry, Nexchip Semiconductor Corp (合晶集成), has become one of its biggest rivals in the legacy chip space, leveraging steep discounts after Beijing’s localization call forced Powerchip to give up the once-lucrative business making integrated circuits for Chinese flat panels. Nexchip is among Chinese foundries quickly winning market share in the crucial US$56.3 billion industry of so-called legacy
Hon Hai Precision Industry Co (鴻海精密) is reportedly making another pass at Nissan Motor Co, as the Japanese automaker's tie-up with Honda Motor Co falls apart. Nissan shares rose as much as 6 percent after Taiwan’s Central News Agency reported that Hon Hai chairman Young Liu (劉揚偉) instructed former Nissan executive Jun Seki to connect with French carmaker Renault SA, which holds about 36 percent of Nissan’s stock. Hon Hai, the Taiwanese iPhone-maker also known as Foxconn Technology Group (富士康科技集團), was exploring an investment or buyout of Nissan last year, but backed off in December after the Japanese carmaker penned a deal
WASHINGTON POLICY: Tariffs of 10 percent or more and other new costs are tipped to hit shipments of small parcels, cutting export growth by 1.3 percentage points The decision by US President Donald Trump to ban Chinese companies from using a US tariff loophole would hit tens of billions of dollars of trade and reduce China’s economic growth this year, according to new estimates by economists at Nomura Holdings Inc. According to Nomura’s estimates, last year companies such as Shein (希音) and PDD Holdings Inc’s (拼多多控股) Temu shipped US$46 billion of small parcels to the US to take advantage of the rule that allows items with a declared value under US$800 to enter the US tariff-free. Tariffs of 10 percent or more and other new costs would slash such