Asian bankers see bright spot of opportunity in UBS-CS merger

News Analysis 24 March

Asian bankers see bright spot of opportunity in UBS-CS merger

As global shockwaves from the collapse and rescue of Credit Suisse [SWX: CSGN; NYSE: CS] abate – at least for now – bankers in Asia are mulling opportunities from the bank's demise and takeover by UBS [SWX:UBSG; NYSE: UBS], financial services market participants told this news service.

"The banking storm has yet to have much of an impact on Asia," said one global investment banker based in Hong Kong. In fact, Asian financial hubs such as Hong Kong will be increasingly seen as safe havens for many investors seeking to deposit capital outside of Europe, he said.

Capital flight from Switzerland – once the world’s safest destination for private assets – has been a trend ever since the country joined sanctions against Russia following the Ukraine war, said a Hong Kong-based economist. The Swiss government’s wipeout of USD 17bn worth of Credit Suisse’s AT1 bonds put the nail in the coffin, dousing Asian appetite for European investment, he noted.

Private bankers have already been sniffing around for opportunities as anxious high-net-worth clients seeking to protect their assets are looking to move funds out of Credit Suisse accounts, said two Hong Kong-based private bankers.

Assets such as short-duration bonds and time deposits have been capturing the attention of some private banking clients, said one of the private bankers.

The fate of Credit Suisse’s investment bank, meanwhile, had been hinging on a merger deal with Michael Klein’s advisory boutique to create CS First Boston. UBS is reportedly examining how to stop the deal by aborting the contract between Credit Suisse and Klein.

UBS chairman Colm Kelleher said it "will be running down the investment banking part of Credit Suisse, because UBS itself has an investment bank-like model" at a news conference announcing the merger on 19 March, as per a media report.  

Credit Suisse M&A deals up for grabs

Credit Suisse, which provides investment banking services via 18 offices in 12 markets across Asia Pacific, has seen a decline in the number of M&A deals advised in recent years, according to Dealogic data.

“There’s been a preference among corporate issuers to choose other investment banks over Credit Suisse in the last twelve months given a general loss of confidence in the Swiss lender,” said a second Hong Kong-based investment banker.

The most active five APAC countries where Credit Suisse acted as an M&A advisor are China/HK (158 deals), Australia (143 deals), South Korea (98 deals), Japan(83 deals), and Singapore (82 deals) in terms of deal count from 2008 to 2023 YTD,  according to Dealogic data.

In 2022, Credit Suisse ranked as the 8th largest financial advisor in APAC in terms of deal value advising 49 M&A transactions worth USD 90.78bn, as per the data. In comparison, UBS ranked as the 13th player with 60 deals totaling USD 66.27bn in 2022. 

As for the mandates Credit Suisse’s team currently has on hand, a third investment banker in Sydney said, those in the middle of the transaction will get completed if not passed on to another bank.  

“Their new work will be zero,” he said.

Transactions in the preliminary stages bear the lowest-hanging fruit for rival banks looking to poach Credit Suisse’s deals, while those run solely by the Swiss lender have already been targeted by bankers eager for new business pitches, a fourth Hong Kong-based investment banker noted.

Two Seoul-based M&A bankers echoed saying that the event would be more likely to impact its future deal pitch. It may not deprive the existing mandate, but “too much uncertainty surrounding the people and key men in the house,” one of them said.   

Credit Suisse has been active in South Korea in terms of M&A advisory services engaging in a range of deals including the government’s privatization in the past. It is also known to have worked closely with South Korean conglomerate SK Group among others, they said.  

According to Dealogic data, Credit Suisse has advised 52 M&A transactions totaling USD 46,16bn from 2018 to 2023 YTD and ranked as the third largest player in deal value, following PwC (410 deals; USD 62.12bn) and Morgan Stanley (36 deals; USD 50.36bn). Out of 52 transactions, 13 deals were related to SK Group, the data shows. UBS ranked as the 14th largest player advising 12 deals valued at USD 7.69bn in South Korea for the same period.

APAC ongoing M&A deals by Credit Suisse (sole advisor)
Target Deal ValueVendorFinancial AdvisorGeographySectorLast Update
MYOBUSD 2.7bnKKRCredit SuisseAustraliaComputer software
CHARLES & KEITH USD 280mL Catterton Asia Credit SuisseSingaporeConsumer: Retail
Trung Nam Group's renewable energy assetsUSD 350mTrung Nam GroupCredit SuisseVietnamConstruction, Energy
Enel Green PowerUSD 699mEnel [BIT:ENEL] Credit SuisseAustralia, ItalyEnergy
AIMS Data Centre (AIMS)USD 500mTIME dotCom (TIME) [KLSE: 5031]Credit SuisseMalaysiaComputer services, Computer software
KT CloudUSD 600mKT Corporation [KRX:030200]Credit SuisseSouth KoreaComputer services
DIO Corporation [KRX:039840]USD 185.1mDIO HoldingsCredit SuisseSouth KoreaMedical

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