UBS SuMi to Acquire Credit Suisse Wealth Management Unit in Japan

UBS has announced that its joint venture in Japan will acquire Credit Suisse’s wealth management division in Japan.

The move follows UBS’s acquisition of the troubled Swiss lender in 2023. UBS has a joint venture in Japan with SuMi Trust Wealth Management Co., which will be in charge of this acquisition.

UBS said on Monday its Japanese wealth management joint venture with SuMi TRUST Wealth Management Co, will acquire Credit Suisse's wealth management business in Japan following the Swiss bank's absorption of its stricken rival in 2023. @UBS #Japan #wealth pic.twitter.com/raJidJ97Sp

— Finance World (@FinanceWorld8) April 8, 2024

Under this deal, UBS SuMi Trust Wealth Management will acquire the employees and clients of Credit Suisse Securities Japan.

UBS SuMi to Acquire Credit Suisse Wealth Management Unit

Under the terms of this acquisition deal, the Credit Suisse client assets in Japan will now be under UBS JV. The partners will also restructure their investments in the new business.

The original UBS will retain 51% ownership, while SuMi TRUST Holdings will have 49% ownership of the new business.

In the press release, UBS SuMi says that all the advisors and wealth management assets managed by Credit Suisse will be under the joint venture. UBS is set to close its merger with Credit Suisse in June, which will mark one of the largest acquisitions in the financial industry in history.

UBS provides wealth management services to clients whose accounts hold over $2 million. The fund manager is planning to retain this limit for its business in Japan. Its clientele base will include those getting services from Credit Suisse Securities.

The acquisition also comes as the number of wealthy households in Japan increases. A study conducted last year by the Nomura Research Institute estimated that the wealthy population in Japan was at 1.5 million. This is a large market for UBS to tap into.

Nevertheless, UBS has to contend with the dominance of domestic banking institutions over the wealth management industry in Japan. UBS is planning on reviewing accounts that have less than $2 million in the Asia Pacific region in favor of higher-value wealth accounts.

Complex Banking Rules in Switzerland

UBS’s focus on Japan comes as the bank faces stricter banking rules in its home country, Switzerland. UBS is the only remaining big bank in Switzerland following the collapse of Credit Suisse.

Therefore, authorities are treading lightly to ensure the bank’s survival and prevent a possible financial crisis in case the bank also fails.

According to Reuters, the Swiss government has already published a list of recommendations to regulate banks considered “too big to fail.” One way it plans to regulate these banks is by establishing tougher business policies.

One of the main areas that will be under scrutiny is the capital requirements. A giant bank like UBS will have to find additional tens of billions of dollars to protect itself against a similar meltdown that happened with Credit Suisse.

UBS has a balance sheet of $1.7 trillion. This amount is double the size of the annual economic output of Switzerland. This dominance over the banking industry and the economy shows UBS holds a critical role, and any signs of weakness could doom the Swiss economy.

Moreover, there are no local banking rivals that could afford to acquire UBS if it collapses.

In May last year, the Swiss parliament advocated for large banks to hold a leverage ratio of 15% of assets. This amount is higher than in Britain, the European Union, and the United States.

UBS has a common equity tier 1 capital of $79 billion, which is a 4.7% leverage ratio. Therefore, the bank needs to take measures to attain the recommended ratio. This could be achieved by reducing its balance sheet and credit supply.