The integration of Credit Suisse into UBS is leading to a major shake-up in their respective research departments. The future of star analysts is also uncertain.

UBS CEO Sergio Ermotti is tireless when it comes to emphasizing the commonalities of UBS and Credit Suisse following the integration of the two. Instead of competing, the next chapter of their shared journey will now be tackled, he reiterated to the public last week after Credit Suisse was delisted from the stock exchange.

Despite promising a shared future, Credit Suisse's integration will lead to job cuts in overlapping businesses, as the two banks will operate independently for only a limited time.

Among the Top Ten

The realignment won't spare the equity research of the two banks, an area where both companies have fared quite well. UBS occupies sixth and Credit Suisse eighth place in Institutional Investors All-America Research Team ranking.

In 2022, UBS analysts ranked among the top three globally in 74 sectors, according to Institutional Investor's Global Research.

Overlapping Areas

To be sure, with the merger of the two banks, the jobs of these analysts are not in immediate jeopardy. However, if UBS analysts do not perform well, the bank can now call on Credit Suisse analysts, undoubtedly increasing competition.

In addition to the star analysts, there are dozens of other specialists at UBS and Credit Suisse who do similar work. They prepare data and publish reports on hundreds of listed companies, with a duplication of efforts bound to occur.

The combined bank will hardly be able to justify two departments dealing with the same issues over time.

Not Particularly Profitable

Moreover, equity research is not the most lucrative area of investment banking. Profitability has suffered in particular since the introduction of the European Union's MiFID II in 2018, which requires the unbundling of trading commissions and investment research.

Unless a bank is convinced it can expand its client base with additional analysts, there is little reason to spend money on expansion.

Looking to the Exit

There are many indications that the equity research activities of the two banks will be reconfigured.

Some sell-side analysts at Credit Suisse are already exploring other opportunities, according to the report. Investment houses such as Jefferies and Barclays are currently eye-catching with an expansion drive that includes hiring new analysts.

Lateral Move

Sell-side analysts could also switch to the buy-side and do research for an asset manager.

But hedge funds and other specialized asset managers currently have a limited number of open positions, and many of the specialized buy-side analyst positions are often better paid.