credit suisse case Flashcards
What characterizes the banking consolidation landscape in Europe post-2008?
Mostly domestic consolidation due to valuation mismatches, regulatory complexity, and political resistance to cross-border mergers.
Why is the European banking sector structurally disadvantaged compared to the US?
Due to fragmented markets, reliance on lending, restrictive regulation post-2008, lower GDP growth, and fewer scale economies.
Why have US banks historically traded at a premium compared to European banks?
Due to higher profitability, more diversified income streams, regulatory advantages, and stronger economic growth.
How did UBS strategically reposition itself after 2012?
UBS reduced investment banking exposure (especially FICC), focused on wealth management, and executed major cost cuts.
Why did Credit Suisse’s valuation deteriorate post-2012?
Due to scandals (Greensill, Archegos), repeated losses, poor risk controls, and unclear strategic direction.
hat were investors’ views on UBS by 2022?
BS was seen as a stable, high-quality European bank with strong capital, clear strategy, and consistent profitability.
Why was CS’s 2022 capital raise insufficient to restore investor confidence?
Because it lacked strategic clarity, offered weak RoTE targets, and had high execution risk.
What were two major red flags in Credit Suisse’s 2022 restructuring plan?
Lack of clarity on CS First Boston strategy and a low RoTE target of ~6% by 2025.
What proportion of RWAs in the “New Credit Suisse” remained in the Markets and First Boston segments?
58% (40% in Markets and 18% in CS First Boston).
How did CS’s RoTE projection compare to peers in 2024 estimates?
CS was an outlier with a ~6% RoTE, while peers like UBS projected ~13%.
What was the most damaging signal of client trust breakdown in Credit Suisse in late 2022?
Massive client outflows, particularly from Wealth Management.
How did regulators mitigate systemic risk in the UBS-CS transaction?
Through a government-backed all-share deal, CHF 200bn liquidity support, and AT1 bond writedowns.
What was controversial about the treatment of Credit Suisse’s AT1 bondholders?
They were fully wiped out before equity holders, contrary to typical capital hierarchy.
How fast was the UBS-CS deal executed?
Over one weekend (March 18–19, 2023) to prevent Monday market chaos.
What was a recurring problem in CS’s leadership structure?
Chronic governance failures and high executive turnover from 2015 onwards.
What is the estimated combined client asset base of UBS + Credit Suisse post-deal?
Approximately $5 trillion in client assets.
Why did UBS ultimately agree to acquire Credit Suisse?
o stabilize the financial system, gain strategic assets cheaply, and cement its leadership in wealth management with regulatory support.
