As ever, the most reliable indicator to assess a situation and its prospect, at any point in time, UBS is no exception, is a look at the stock price and the yield levels of debt papers. Remember, there are no memories and no regrets in finance, Swiss finance expert Beat Wittmann writes in a note for finews.asia.
The crucial and additional problem regarding UBS, however, is the Swiss trinity of policymakers – the Ministry of Finance (EFD), the central bank (SNB) and the regulator (Finma) – lacking institutionalized resources and processes to analyze capital market price signals and their implications. Hence, they were caught off guard by the demise of Credit Suisse, missing the troubled bank’s ever-declining stock price and sharply rising refinancing cost.
The UBS share price tells a different story. I maintain a positive outlook thanks to the merged bank’s financial safety cushion after acquiring Credit Suisse at rock bottom for a «deal of the century» price and in the light of UBS’ positive net new assets flows enhanced by the sheer size and stability of the newly combined UBS and Switzerland’s safe haven bonus in time of geopolitical turmoil.
Vastly Different Corporate Culture
The challenge for the new UBS, however, is the complex integration of Credit Suisse with its vastly different corporate culture and intricate technology platforms and operations, an area in which neither Swiss nor European banks have excelled so far.
At this stage, it is far too early to judge the progress of integration and restructuring. Yet, the UBS share price will be the best indicator to measure respective progress, albeit somewhat lagging.
Relevant Benchmark
The relevant benchmark in terms of growth, profitability and valuation for UBS and its leadership Chairman Colm Kelleher and CEO Sergio Ermotti is US bank Morgan Stanley – Kelleher’s former employer.
Beat Wittmann is chairman and partner of Swiss-based financial advisory firm Porta Advisors for nine years now. His more than 30-year career in Swiss banking includes stints at both UBS and Credit Suisse as well as Clariden Leu and Julius Baer.
