Last week, UBS finalised the takeover of Credit Suisse, which has now laid the groundwork for the integration of the two global brands.
The UBS-Credit Suisse deal has given UBS yet another chance to play in India’s fast-growing wealth management space, as the number of millionaires and billionaires is on the rise.
“India is already witnessing rapid growth in the sector, driven by a rising affluent population and increasing demand for professional wealth management services, and the merger could combine the strengths and capabilities of both banks, enabling them to offer a broader range of solutions to Indian clients,” believes Raghvendra Nath, Managing Director, Ladderup Wealth Management Private Limited.
According to a McKinsey report, “the affluent and mass affluent segments in Asia, defined as those with investable assets of $100,000 to $1 million—especially in developing economies like India’s—are projected to hit $4.7 trillion by 2026, up from $2.7 trillion in 2021, as people in the region move up in income levels.”
UBS has already announced the appointment of Credit Suisse’s Mihir Doshi as its India head. “This shows the plan of UBS to seamlessly integrate the two,” says a foreign banker. UBS actually left India in 2016. Clearly, the timing is now opportune for Swiss majors to expand the wealth management business in India.
Last week, UBS finalised the takeover of Credit Suisse, which has now laid the groundwork for the integration of the two global brands. The Swiss banking giant UBS’s takeover of former competitor Credit Suisse is one of the most significant banking mergers since the 2008 financial crisis. “This establishes a new banking titan in global wealth management with a balance sheet of roughly USD 1.6 trillion. The new entity will oversee USD 5 trillion in assets under management, which will make it the world’s largest wealth manager. The combined entity will also become the largest asset manager with a 40 per cent market share in Switzerland as per Swiss funds data,” says Ajit Deshmukh, Managing Director, Equirus Wealth.
Credit Suisse India, which has a banking license, operates in wealth management, investment banking, and brokerage services and has a relatively small presence in the country. Its deposit base as of March 2022 was Rs 2,800 crore, with loans and advances of Rs 947 crore, total income of Rs 804 crore, and a net profit of Rs 303 crore. The business has been in decline for the last three years.
“The merger offers UBS much-needed strength in the wealth management market and the industry at large. We expect the deal to solidify UBS’ reign as the leading Swiss-based global wealth manager, boasting operations across several attractive growth markets, even as US-based wealth management firms continue to build their strength and offer tough competition to the giant. The deal could trigger enhanced consolidation among global private banks focused on combining resources, expertise, and client networks to ensure optimal competition in the wealth management space,” says Nath of Ladderup Wealth Management.
Are the bigger private banks like ICICI Bank and Axis Bank, with Citi’s consumer banking acquisition, positioning themselves better to tap the market?
“While it’s too early to comment, the combined entity will certainly gain from this merger in the wealth management space on a global scale. The key driver of revenues currently, as per 2021 data for UBS, is fees (around 50 per cent ) from global wealth management, followed by investment banking revenues. UBS works on a capital-light model, and they intend to do the same with the new entity. Global wealth management ideally will continue to be a focused vertical for the new entity as the newly drafted CEO has already signaled to scale down the investment banking piece for Credit Suisse,” says Deshmukh of Equirus Wealth.
