Credit Suisse (NYSE:CS) is actively seeking a suitable buyer for its securities joint venture (JV) in China, known as Credit Suisse Securities China (CSS), where CS holds a 51% ownership stake, as per Reuters. The primary motivation behind this sale is attributed to Credit Suisse’s impending acquisition by the UBS Group (NYSE:UBS).
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Indeed, it is crucial to highlight that UBS is already the majority owner of a securities brokerage joint venture in China. Chinese regulations impose restrictions on international companies, preventing them from holding more than one majority-owned brokerage license.
Therefore, in order for UBS to comply with these regulations, it was necessary for Credit Suisse to sell its stake in CSS. This step ensures that UBS remains in compliance with Chinese regulatory requirements regarding ownership of brokerage licenses.
In order to avoid potential overlaps, Credit Suisse has not only halted its expansion plans in the securities business in China but also abandoned several other initiatives. In May, Credit Suisse decided to cancel its plans to establish a locally incorporated bank in China, as UBS already operates a local bank in the country.
Latest on the UBS-CS Merger
In a recent development in the UBS-CS merger, the Swiss government has signed a loss protection agreement with UBS. Under this deal, the government will cover up to $10 billion (CHF 9 billion) in losses that UBS might incur due to the Credit Suisse acquisition.
It is noteworthy that UBS cautioned that the merger would result in a substantial financial impact of approximately $17 billion. This includes adjustments to fair value and regulatory expenses. UBS is expected to close the acquisition soon.
Is UBS Stock a Buy?
UBS stock has a Hold consensus rating based on five Buy, three Hold, and three Sell recommendations. Analysts’ average price target of $25.16 implies 24.2% upside potential. Shares have gained nearly 10% year-to-date.
Investors looking for the most accurate and profitable analyst for UBS could follow J.P. Morgan analyst Kian Abouhossein. Copying the analyst’s trades on this stock and holding each position for one year could result in 84% of your transactions generating a profit, with an average return of 19.16% per trade.
