UBS’s strategic move: Apollo acquires $8 billion in Credit Suisse assets

UBS, the Swiss banking giant, recently finalized the sale of Credit Suisse’s securitised products business to Apollo Global Management, marking a significant step in its strategy to streamline operations and focus on core activities. This sale, part of UBS’s efforts to divest non-core assets following its takeover of the collapsed banking group, is expected to have far-reaching effects on both UBS and Credit Suisse.

Background: UBS’s Acquisition and Credit Suisse’s Rescue

UBS’s takeover of Credit Suisse came after the latter had to be rescued in March last year in a government-sponsored operation. This acquisition was part of UBS’s broader strategy to strengthen its market position and capitalize on synergies between the two institutions.

The Deal Details

Apollo will purchase $8 billion of “senior secured financing facilities” from UBS, with UBS anticipating a net gain of about $300 million from the deal in the first quarter of 2024. This agreement not only benefits Apollo but also aligns with UBS’s strategy of winding down and simplifying its non-core and legacy portfolio.

Strategic Implications

UBS Chief Executive Sergio Ermotti emphasized that the deal would free up capital from non-core activities, reducing costs and complexity in its business. The sale also indicates that the integration of Credit Suisse into UBS is progressing well

“We are pleased to have completed the Atlas transition in partnership with UBS, ensuring an economically neutral outcome for our firm,” stated Marc Rowan, Apollo’s Chief Executive Officer.

Market Response

UBS shares have seen an 8% increase so far this year, reflecting positive market sentiment towards the strategic moves by the bank. However, there is little room for disappointment, as high expectations may have already been priced into the stock.

Future Outlook

Credit Suisse had already begun winding down its securitised products business in 2022, with about $20 billion of remaining assets to be managed by Apollo. UBS will retain the assets not transferred to Apollo, although the exact value of these assets remains unclear.

Conclusion

UBS’s sale of Credit Suisse’s securitised products business to Apollo marks a significant milestone in its strategic journey to streamline operations and focus on core activities. The deal is expected to have a positive impact on UBS’s financials, freeing up capital and reducing complexity.

In conclusion, UBS’s sale of Credit Suisse’s securitised products business to Apollo is a strategic move that is expected to benefit both parties. The deal aligns with UBS’s strategy of shedding non-core assets and simplifying its business, while also indicating a successful integration of Credit Suisse into UBS.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.