Published on 9 Apr 2024 on Zacks via Yahoo Finance

UBS Group (UBS) to Swap Stake in CS Securities in China

UBS Group AG UBS is considering attaining the complete ownership of its operations in China. In order to do so, UBS will swap its holding in Credit Suisse’s (“CS”) onshore securities business with a Beijing government investment fund. This news was reported by Bloomberg, citing people familiar with the matter.Particularly, UBS Group will acquire 33% stake held in its joint venture with Beijing State-Owned Assets Management Co., UBS Securities Co. In return, UBS is willing to sell part of or its entire 51% stake in CS Securities to the Beijing government investment fund.The deal was proposed by UBS Group as Chinese regulations do not allow any foreign shareholder to hold majority stakes in two domestic brokerages simultaneously. UBS already owns 67% stake in its own UBS securities since 2022. Besides that, the company’s proposal serves several other purposes. Firstly, UBS could potentially reduce competition with its strongest competitor, Citadel Securities. Secondly, this proposal aligns with UBS Group's strategic goal of consolidating its ownership of its China platform, which will allow the bank to strengthen its position further in the Chinese market.Currently, UBS is following parallel approaches to address its ownership structures. Firstly, it is in discussions with its state-owned shareholder to potentially swap shares. Alongside, the bank is also engaged in advanced discussions to sell CS Securities to Citadel Securities.UBS Group’s asking price for the entire CS’ China unit, including the stake held by its local partner, is approximately 2 billion yuan. The process for bidding of CS’ investment bank in China has been continuing for several months, with several strong competitors, including Ant Group and Citadel Securities.In the past, UBS has made efforts to increase its ownership to 100% in China. However, the Beijing government is reluctant to divest its stake, as the Chinese government foresees business growth and earnings potential in the company’s operations.UBS shares have gained 26.1% on NYSE over the past six months compared with the industry’s growth of 15%.

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