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There is a lot of confidence in the new mega-bank on the stock market. There are good arguments for this. But there are also risks.
Author: Victoria Habermacher and Andreas Kohli
Plus 6.1 percent – UBS shares rose significantly again today. Investors liked what they heard from UBS CEO Sergio Ermotti early in the morning. Firstly, as expected, Credit Suisse will be fully integrated into UBS, which will lead to significantly more savings in the long term than previously expected. Secondly, according to Ermotti, the CS has no longer received any money since July. And thirdly, UBS is receiving more money in asset management than it has been in ten years.
What’s more: “In the current quarter, in July and August, we also see inflows of customer deposits and customer money at both UBS and Credit Suisse,” says Ermotti in an interview with SRF.
After the takeover, many were skeptical
The rising share price of UBS shows that the stock market believes that the new mega-bank will make high profits in the future. That wasn’t always the case: after the announcement of the CS takeover on March 19, the share price trended sideways for weeks.
These uncertainties have subsided.
For what reason? “There was a lot that was unclear in the spring,” says Andreas Venditti, banking analyst at Vontobel. It was not known whether other regional banks in the USA would collapse or whether a new financial crisis could be triggered. “These uncertainties have subsided.”
Things only really started to look up in late summer, around the day UBS returned the federal guarantees. “That calmed things down even more,” says Venditti. Since the beginning of August, UBS shares have increased by over 25 percent.
UBS shares once cost 70 francs
23.50 francs: The UBS share price is now far behind its all-time high (it reached over 70 francs in 2007), but it is still higher than ever since the financial crisis of 2008, since the near collapse of UBS. Is the new optimism justified?
Yes, says banking expert Venditti, “the combined UBS is much larger and can generate economies of scale.” Once the major restructuring is completed, the bank will be able to work much more efficiently. “That should mean higher profits.”
Despite all the optimism: it will take years until CS is fully integrated into UBS. Only then will it be possible to finally judge whether the CS takeover was a good deal for UBS or not. Just think of the legal legacy in the CS books.