Source of this article: Times Finance Author: Liu Ziqi
Source: Diagram Worm
After a series of twists and turns, the merger of UBS AG and Credit Suisse (CS.US) has made substantial progress.
On May 7, UBS issued a statement that it expects to complete the merger of UBS and Credit Suisse on May 31. In March 2023, under the mediation of the Swiss authorities, UBS plans to acquire Credit Suisse for 3 billion Swiss francs, equivalent to about 22.305 billion yuan.
In June of that year, Credit Suisse ceased to exist, and its assets, liabilities, and contracts were transferred to UBS in accordance with the law. With the integration of the two companies, Credit Suisse Securities has also changed from a holding subsidiary of Credit Suisse to a holding subsidiary of UBS.
On May 3, Credit Suisse Securities disclosed its 2023 performance report showing that in 2023, the company's net loss reached 199 million yuan, which is another loss after its loss of 255 million yuan in 2022. As for the reasons for the loss, Credit Suisse Securities mentioned the impact of the merger between the controlling shareholder Credit Suisse and UBS.
In addition, according to the regulations of the China Securities Regulatory Commission, the number of shareholders of securities companies and the controlling shareholders and actual controllers of shareholders shall not participate in more than two securities companies, and the number of securities companies controlled shall not exceed one.
At the beginning of 2024, according to media reports, Castle Securities, a well-known overseas quantitative giant, plans to acquire Credit Suisse Securities to expand its business scale. Then news came out that Ant Group was willing to pay a high price to acquire Credit Suisse Securities to obtain a brokerage license. According to Caixin, Beijing State-owned Assets Company may replace UBS's equity in Credit Suisse Securities with its stake in UBS Securities.
At present, there is no conclusion on the acquisition of Credit Suisse Securities' shares, but what is the charm of Credit Suisse Securities, which has been losing money for two consecutive years, and attracted many financially powerful consortia to come?
From "darling" to "outcast"
Credit Suisse Securities, formerly known as Credit Suisse Founder Securities, was established in October 2008 with a registered capital of 800 million yuan, and its shareholders are Credit Suisse and Founder Securities (601901. SH), the shareholding ratio is 33.30% and 66.70% respectively.
In 2020, Credit Suisse unilaterally increased its capital to Credit Suisse Founder Securities, increasing its shareholding to 51% and becoming its controlling shareholder; After this round of capital increase, Founder Securities' shareholding ratio dropped to 49%. On June 29, 2021, Credit Suisse Founder Securities changed its name to Credit Suisse Securities.
Initially, Credit Suisse was dissatisfied with the fact that the investment banking business of the former Credit Suisse Founder Securities had not made achievements for many years, but because it did not have much say in the matter, and most of the company's executives were sent by Founder Securities, it has been in a passive position. Therefore, Credit Suisse's goal is to seek 100% control of Credit Suisse Securities, which can be adjusted to the company's personnel.
In September 2022, Founder Securities announced that it planned to transfer its 49% stake in Credit Suisse Securities to Credit Suisse at a price of 1.14 billion yuan. If the transaction is completed, Credit Suisse will hold 100% of Credit Suisse Securities, which will become the third wholly foreign-owned securities firm after J.P. Morgan Securities and Goldman Sachs Gao Hua Securities.
From the perspective of Founder Securities, the transfer of equity may be forced by regulatory pressure. In August 2014, Founder Securities' acquisition of 100% equity of National Securities (now Founder Securities Underwriting and Sponsorship Co., Ltd.) was approved by the China Securities Regulatory Commission. According to the requirements of the China Securities Regulatory Commission, Founder Securities must resolve the issue of intra-industry competition between Founder Securities, Credit Suisse Securities and National Securities within five years of controlling National Securities.
However, due to Credit Suisse's liquidity crisis in 2022, the acquisition had to be abandoned. In 2022, Credit Suisse's revenue fell sharply, with a net loss of CHF 7.3 billion. In March 2023, the Swiss authorities made a decisive move to lead UBS's acquisition of Credit Suisse. In the acquisition plan, UBS offered 3 billion Swiss francs to acquire all Credit Suisse shares, equivalent to about 22.305 billion yuan.
In June 2023, all relevant legal procedures were completed, Credit Suisse ceased to exist, and assets, liabilities, and contracts were transferred to UBS in accordance with the law. In September of that year, UBS's board of directors approved the merger, and the two parties signed a definitive merger agreement. Now, there is a new development in this matter, and the merger of UBS and Credit Suisse will be completed on May 31.
Upon completion of the merger, UBS will have a controlling stake in both UBS Securities (67%) and Credit Suisse Securities (51%). According to the China Securities Regulatory Commission's "one participation and one control" regulation, an institution cannot control two securities business licenses at the same time.
From this point of view, both UBS and Founder Securities seem to have regarded Credit Suisse Securities as a must-sell item that has to be sold.
Credit Suisse Securities is struggling with shareholder changes
In the past, Credit Suisse Securities has achieved relatively bright results. After two consecutive years of losses in 2018 and 2019, Credit Suisse Securities turned losses into profits in 2020, achieving operating income of 283 million yuan, a year-on-year increase of 84.56%; The net profit was 11.8049 million yuan, a year-on-year increase of 128.22%.
In 2021, Credit Suisse Securities' performance continued to grow significantly, achieving an annual operating income of 497 million yuan, a year-on-year increase of 75.57%; The net profit was 45.1858 million yuan, a year-on-year increase of 282.77%.
In 2022, Credit Suisse Securities' performance was dragged down due to a crisis in major shareholders. In that year, the company turned from profit to loss, achieving operating income of 289 million yuan, a year-on-year decrease of 41.91%; The net loss was 255 million yuan, a year-on-year decrease of 663.27%.
来源：wind
Affected by the change of shareholders, Credit Suisse Securities will continue to lose money in 2023, achieving an annual operating income of 157 million yuan, a year-on-year decrease of 45.58%, and a net loss of 199 million yuan.
Specifically, in 2023, the net income from fees and commissions from Credit Suisse Securities' investment banking business will be 40.4591 million yuan, a decrease of 38.34% from the same period last year; The net income of brokerage fees was 3.1782 million yuan, down 97.01% from the same period last year. In addition, the company's net interest income was 18.4248 million yuan, and other business income was 90.5234 million yuan.
Source: Credit Suisse Securities Annual Report
It can be seen that the decline in the performance of investment banking business and brokerage business is the main reason for the decline in Credit Suisse Securities' operating income in 2023. As for the reasons for the decline in investment banking business income, the company said that in 2023, due to market changes and the progress of project execution, investment banking business income will decline to a certain extent.
As for the reasons for the decline in brokerage revenue, Credit Suisse Securities said that after the merger of Credit Suisse and UBS, the company's brokerage business institutional customers chose to reduce trading activities through the company due to the uncertainty after the merger, coupled with the decrease in the total trading volume of A shares in 2023, and the company's response to the call of the regulatory authorities in 2023 to take the initiative to reduce the commission rate, brokerage business commissions fell sharply year-on-year.
In addition, Credit Suisse Securities had a total of 126 employees at the end of 2023, compared to 234 at the end of 2022, a year-on-year decrease of 46.2%. Among them, the number of senior managers of the company has been reduced from 11 to 8, the number of investment banking personnel has been reduced from 58 to 30, and the number of wealth management customer department has been reduced from 22 to 2.
In addition, Times Finance noticed that Credit Suisse Securities will change its general manager in 2023. According to its disclosure information in 2023, the general manager of the company has been changed from Wang Jing to Zhang Zhengyu, who has served as the head of Credit Suisse's securities trading department and the head of institutional brokerage business and research business.
Previously, UBS CEO Anshuge had said that the merger could lead to tens of thousands of jobs being laid off, and UBS would save billions of dollars from the bank's comprehensive cost base. Judging from the data of Credit Suisse Securities' 2023 annual report, layoffs may have already occurred.
Who will be the pick-up man?
Despite two consecutive years of losses, Credit Suisse Securities' charm has not diminished.
Previously, Credit Suisse Securities only had a license for stock and bond underwriting and sponsorship, and securities brokerage business (limited to Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone) in the A-share market. In March 2023, Credit Suisse Securities was approved to change its business scope, expanding its securities brokerage business scope to the whole country, and adding two licenses for securities investment consulting and securities proprietary business.
Some industry insiders told Times Finance that with the rapid development of the financial industry and the improvement of financial license acquisition standards, the approval of financial licenses has been significantly tightened, but the enthusiasm of major companies for financial licenses is increasing day by day.
In January this year, media reported that Castle Securities, a world-renowned market maker founded by billionaire Ken Griffin, a hedge fund newcomer, planned to acquire Credit Suisse Securities. Previously, Zhao Peng, CEO of Castle Securities, had revealed that Castle Securities was planning to expand.
At present, Castle Securities has obtained the qualification of qualified foreign institutional investor in China, but does not have a license to provide securities brokerage and underwriting business on the Shanghai and Shenzhen stock exchanges, and the acquisition of Credit Suisse Securities will help it expand its business scale in China.
According to media sources citing people familiar with the matter, Castle Securities had offered 1.5 billion to 2 billion yuan, while Credit Suisse expected a price of about 2 billion yuan. In addition, Warburg Pincus also considered acquiring the business, but abandoned it because it did not meet the set reserve price.
Subsequently, a number of media reported that Ant Group made a takeover offer for Credit Suisse Securities, and the bid was higher than Castle Securities, hoping to establish a securities business through the acquisition of Credit Suisse Securities. In this regard, Ant Group told Times Finance that it would not reply.
Judging from Ant Group's current financial landscape, there is a lack of a brokerage license. As early as 2015, Ant Group tried to acquire Debang Securities by way of shareholding, and reached a capital cooperation with Debang Securities, but finally stuck at the last hurdle of regulatory approval.
However, compared with Castle Securities, Ant Group also faces regulatory pressure. In recent years, regulators have been stepping up their oversight of financial services companies. Therefore, it will not be easy for Ant Group to win Credit Suisse Securities.
In April this year, the acquisition of Credit Suisse Securities' equity was again subject to change. According to media reports, UBS is considering changing its strategy and intends to exchange its 51% stake in Credit Suisse Securities for its 33% stake in UBS Securities with Beijing State-owned Assets Corporation.
It is understood that UBS has been seeking a wholly-owned controlling stake in UBS Securities, that is, acquiring the remaining 33% of the shares from Beijing State-owned Assets Corporation. At the same time, Beijing State-owned Assets Corporation currently does not have an actual controlling securities company. From this point of view, it seems that this solution can make it a win-win for both parties.
However, if Beijing State-owned Assets Company wants to wholly own Credit Suisse Securities, it will have to acquire another 49% stake from Founder Securities. Judging from the announcement of the proposed transfer of shares issued by Founder Securities that year, as of December 31, 2021, the appraised value corresponding to the 49% equity of Credit Suisse Securities was 1.14 billion yuan.
At this time, none of the above-mentioned potential buyers have publicly announced the acquisition. In the end, the answer to the question of who will be the winner of Credit Suisse Securities may need to be revealed after the merger of UBS and Credit Suisse is completed.