UBS Group's agreement to acquire its distressed Swiss banking rival Credit Suisse Group for more than $3 billion, coupled with First Republic Bank's stock dropping another 29% on Monday, will only further shake up a U.S. wealth management market that has seen more than a decade of unbridled growth and stability.
The emergency deal for Credit Suisse was announced Sunday, after the bank had been hammered for months about the potential weakness of its financial positions. UBS remains committed to its growth plans in the United States, industry sources said.
"The combination supports our growth ambitions in the Americas and Asia while adding scale to our business in Europe, and we look forward to welcoming our new clients and colleagues across the world in the coming weeks,” UBS CEO Ralph Hamers said in a statement on Sunday.
Meanwhile, many in the U.S. wealth management industry started the week wondering about the fate of First Republic Bank's network of 200 or so high-end financial advisors, the bulk of whom have been hired in the past decade from giant rivals like UBS.
Despite Friday's announcement that a group of large banks would provide $30 billion in insured deposits to First Republic, its shares hit a new 52-week low on Monday and were trading at $16.23 just before 1 p.m. ET.
In 2010, wealth management accounted for 5% of First Republic Bank's total revenue, according to the company. Jump forward a dozen years, and in 2022, wealth management generated 15% of total revenue, with $271.2 billion in total wealth management assets at the end of last year.
Credit Suisse exited the U.S. wealth management industry in 2015 when it sold recruiting access to its 220 or so financial advisors to Well Fargo & Co., That means there's no immediate overlap of advisor offices or capabilities in the United States, where UBS has close to 6,000 advisors, many of whom are consistently the most productive in the industry in terms of annual revenue.
Industry sources noted that outside the United States, particularly in Asia and in Switzerland, UBS and Credit Suisse do compete for wealthy private banking and wealth management clients.
But the second week of the current banking crisis sparked by the collapse March 10 of Silicon Valley Bank is likely to cause some disruption in the wealth management market, one industry recruiter noted.
"This all makes me wonder who else needs to get bailed out," said Casey Knight, executive vice president of ESP Financial Search, a recruiting firm. "This kind of stuff is good for financial advisor movement and recruiting. The uncertainty means advisors will look around more at other firms."
The UBS deal for Credit Suisse has the most impact in Europe, particularly in Switzerland. "The combination is expected to create a business with more than $5 trillion in total invested assets and sustainable value opportunities," UBS said in the statement Sunday. "It will further strengthen UBS’s position as the leading Swiss-based global wealth manager with more than $3.4 trillion in invested assets on a combined basis, operating in the most attractive growth markets."
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