Quick thread on UBS, Credit Suisse merger:

This comes off the back of the rumours that UBS and Credit Suisse are considering a merger, spearheaded by the UBS chairman, in a move nicknamed Project Signal. /1 https://insideparadeplatz.ch/2020/09/14/projekt-signal-axel-weber-plant-ubs-cs-fusion/

In terms of AUM, UBS's wealth management assets are much higher than Credit Suisse's, however in terms of total AUM, they are not too far apart.

However, Credit Suisse has seen better growth in its asset-management business over the past 12 months, compared to UBS. /2

According to @SPGlobal, this would create one of the largest banks in Europe, with deposits totaling around 1.6 trillion euros, putting the new super-bank only behind HSBC, BNP Paribas, and Credit Agricole.

The flip side of this is a cut of 15,000 jobs across the two banks. /3

Investors are likely to welcome this proposed merger as neither banks have recovered since the fall in share price following the GFC in 2007. Cost synergies, streamlining and a more efficient bank would hopefully boost the bottom line in the balance sheet, and the share price. /4

In Q2 2020 earnings, UBS announced a net profit of $1.23 billion for the second quarter of 2020, down 11% from the same period last year whilst Credit Suisse reported net income of $1.27 billion in the second quarter of 2020, up 24% for the same period last year. /5

In terms of ECL (expected credit loss), CS had set aside
$625m in Q1 and added another $325m during Q2. UBS had credit loss expenses of $272 million in Q2 - $110 million came in personal and corporate banking and $78 million in the investment bank. /6

Lastly, at the end of Q2, CS's CET 1 ratio stood at 12.5, versus 12.1% at the end of the Q1. UBS's CET 1 capital ratio stood at 13.3%, versus 13.3% a year ago. /7

Finally, the questions remains, what is the motive behind this merger? It seems like neither bank have particular liquidity or solvency issues, and a merger on this scale is likely to face huge scrutiny from FINMA - the Swiss banking regulators. /8

Or is the goal just to create a Swiss Superbank able to compete on the same level as the big European banks such as HSBC and BNP Paribas and the huge American banks?

As always, if I've made any mistakes, or if you have any comments, feel free to reply to this thread! /end

cc: @lisaabramowicz1 @business @GregMannarino @litcapital @zerohedge @Newsquawk