RE: Why a Credit Suisse deal is a real steal for a UK bank.2 May 2021 09:36
Sure, plenty of people will dismiss that as bonkers. After all, banking mergers don’t exactly have a great reputation. Lloyds was almost destroyed by its acquisition of HBOS, while even a decade later RBS, renamed as NatWest again, has still not recovered from its bid for Holland’s ABN Amro.
But they don’t necessarily have to be a disaster. Barclays’s purchase of the remnants of Lehman Brothers after the last crash was a huge success, making the bank a significant player on Wall Street for the first time.
Going back earlier, HSBC’s acquisition of the UK’s Midland Bank transformed it from an Asian to a global player, and has been consistently successful. In truth, as so often in business, an acquisition can work or not work. It depends on the deal, the moment, and the price. And right now there are three reasons why buying Credit Suisse would make sense for one of the British banks.
First, it has a unique franchise in one of the oldest financial markets in the world. Its private banking, wealth management, and asset management units are huge. It is the second largest bank in Switzerland, one of the biggest finance markets in the world. It has a depth of experience and contacts in global commercial banking that few others can match. All of those are valuable assets that it has taken more than a century to create, and they still have plenty of value despite its current troubles.
Next, there is a natural fit between British and Swiss finance, and now more than ever, Both the UK and Switzerland are major European financial centres (Zurich and Geneva are bigger rivals to London than Paris or Frankfurt), and outside the European Union. A bank that straddled both would create a genuine European champion.
Finally, it is a once-in-a-lifetime bargain. Amid a wave of scandals, Credit Suisse’s share price is at a 25-year low: on Friday, the shares were trading at less than 10 Swiss francs compared with more than 20 in April 1995. If you don’t buy it now, the chance won’t come again.
Who might go for it? Its market value has slumped to just ÂŁ18bn. Barclays is twice that size. Acquiring Credit Suisse would make it a genuinely global bank for the first time in its history, especially in commercial lending. HSBC is three times its size. If it acquired its Swiss rival, it could integrate it, and then split its Chinese and Western units to spin out two global banks. Heck, even Lloyds is double the size of Credit Suisse measured by market value: the culture clash might be, er, interesting, but at least the choice of chairman would be obvious.
The important point is this. True, an acquisition of Credit Suisse would be risky. There is no way of knowing for sure what horrors may lie hidden within it. And it might well ruffle a few feathers, to put it mildly, in Switzerland. But in business sometimes it pays to be both bold and opportunistic.
Credit Suisse is a huge prize – the only real question is whether anyone has the guts to go out and take
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