UBS/CS merger rationale
Looks like CS is trading at around 0.2x P/B, and UBS's investor deck mentioned that the transaction will be 74% accretive to book value per share. In of itself, makes sense, but I'm assuming the book value is overstated and hasn't been adjusted yet. So what's the play here for UBS - how can it make money off of this acquisition? It acquires hundreds of billions in deposits, but along with it, a potentially shitty portfolio of assets. How does the accretion math usually work with bank M&A? Not familiar with it at all.
The rationale is, the Swiss government ordered us to do it. The math is made up later. It's like Goldman's math for the hostile takeover defense of TWTR against Elon. They got an analyst to poke the spreadsheet until the output was what they wanted.
In broad strokes, they'll get cost cuts by firing a lot of people, but as far as specific numbers that they put on their investor deck, there is NO way they could create accurate fidelity on a merger of that size over the weekend.
Yeah, that's what I was thinking. I guess what I'm really curious about is, do you view CS's loan book as being as fucked as the market implies? I admittedly know next to nothing about FIG, but my assumption was that provided these loans are held to maturity, CS could do well. If there's a bank run, based on current rates, trading values of those same securities are too low and would screw over the bank. Since a bank run is currently happening, it trades at a lower P/BV. However, if UBS acquires CS, UBS has probably enough liquidity and stability to stave off a bank run, which suddenly improves the viability of the loan book and maybe leads to an upwards re-rate on a P/BV basis? Honestly just trying to make sense of bank M&A logic, even if this is a different situation where UBS was forced to acquire regardless of whether it was accretive or not.
I'm inclined to agree. I'm not FIG either so take my comments with a Mt. Everest grain of salt. CS did indeed make *some* crappy loans but the withdrawal of deposits seems like a self fulfilling prophecy. Kicking out Russian capital didn't help either. So if the depositors that fled come back to UBS, or at the very least stop leaving, could be a plus.
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