The jury is out on whether the merger with Credit Suisse is a great or terrible deal for UBS. Once the dust has settled, what may look like a great deal may actually end up as a disaster, or vice versa.
What is clear, however, is that it is yet another blow to Europe’s position in the global equity capital markets.
This week Credit Suisse insiders and other bankers have told GlobalCapital that they expected the former Swiss giant’s ECM business to be history very shortly, and it is far from certain that UBS will bother to salvage the remains. In recent years both banks have shrunk their ECM franchises and focused on wealth management, a reactionary move to a gradual descent down the league tables.
Things were not always this bad. According to Dealogic, UBS was the top-ranked European firm in global ECM last year, albeitonly in 10th place. The top ranks were taken by the big five US banks — Bank of America, Citi, Goldman Sachs, JP Morgan and Morgan Stanley — and four Chinese counterparts.
Until Sunday, both Credit Suisse and UBS sat among the nine bulge bracket banks. Following the merger, European houses will only make three out of the remaining eight, and much of Credit Suisse’s market share will be up for grabs to the highest bidder.
Over the past years, Europeans have not only lost bookrunner points. Their importance as global coordinators, those that mastermind the deals instead of just providing financing, has waned as well.
At a time where the competitiveness of European markets with the US is already a point of concern (and not just in the UK, where bashing the City for losing Softbank’s Arm and a few other big listings to the US has become a national sport in the past few weeks — Germany’s biggest public company Linde has confimed it will move its listing to New York as well), losing financing roles, seats at the table where decisions are made, and now an entire global investment bank, is not encouraging for companies or investors with doubts on European equities.
It seems wrong, however, for stakeholders to simply give up and accept that Europe just won’t be able to keep up and instead will coast along as a semi-liquid cash pool for companies that failed to get a good deal from private equity and are too small or domestic for a US listing.
It is important that the sector is maintained. Deep, vibrant capital markets are essential to deal with the challenges that Europe and its citizens will continue to face in the coming decades.
Innovative start-ups need money to keep the economy growing and provide jobs. Established companies need access to equity funding to master the energy transition. Individuals need investment options as the pensions system cracks under the weight of an aging population.
The imminent death of a once great investment bank just makes it all the more urgent for European governments and regulators to finally develop a serious vision for their ECM future, a vision that goes beyond superficial reviews in the UK and the snail-paced creeping towards a capital markets union in the EU.