Who’s eating Credit Suisse

The forced rescue of Credit Suisse on March 19, 2023 closed a grand, but battered house on the investment banking street. Not since 2008 with the falls of Bear Stearns, Lehman Brothers and Merrill Lynch have the capital markets lost such an important player.

Since March, rivals have feasted on the wounded body of Credit Suisse. There is a scramble for position in many segments of the markets, but in most of them how the mêlée will leave the relative strengths of competitors will only become clear in 2024, when the process of dismemberment runs its course.

An early guide is which banks have hired potentially decisive talent from Credit Suisse. Santander has recruited dozens of CS bankers including, in November, David Miller, former co-head of investment banking.

But business does not necessarily follow the bankers — there is a lot more to client-bank relationships than that. And new arrivals must fit into the firm. “Santander in the US has gone big,” says a senior banker at one rival firm. “It will be very interesting to see — the integration risk is significant from a culture point of view. Good luck to them.”

Santander’s investment bank has no doubt been urged to pounce by its new group CEO, Hector Grisi, who worked for 18 years at Credit Suisse. However, the bank with first dibs on Credit Suisse was, of course, UBS, which the Swiss regulator asked to consume its stricken rival in March.

Credit Suisse at its end was not what it had been. Once a bulge bracket player in M&A, equities, bonds, leveraged finance, securitization, it had gradually retreated from market after market or been beaten back, buffeted by a stream of scandals that cost the bank money, distracted and disrupted its management, and above all, by its last years, was causing clients to withdraw — the drain that eventually killed it before its bold restructuring plan could be implemented.

UBS did not want Credit Suisse, but when the Swiss government made it take the firm on, it was determined to step out on the front foot. Chairman Colm Kelleher declared, twisting the knife: “This acquisition is attractive for UBS shareholders but, let us be clear, as far as Credit Suisse is concerned, this is an emergency rescue.”

The takeover “creates significant sustainable value for UBS”, the bank said, while also insisting UBS’s strategy was “unchanged”.

Nevertheless, it was clear this was going to be an enormous job for UBS, and 10 days later, with the nicest possible words of farewell, CEO Ralph Hamers was ejected in favour of Sergio Ermotti, who had led UBS for nine years from 2011, turning it round after the financial crisis.

Since March, Credit Suisse has remained a ship at sea, carrying on business. But at the same time the ship-breaking and recycling has begun.

Unlike many previous bank takeovers — such as Barclays absorbing Lehman’s US business or Bank of America swallowing Merrill Lynch — UBS and Credit Suisse are not an obvious good fit for each other.

Despite their evident differences, each firm is the other’s closest cognate. Both were Swiss commercial banks that had taken over foreign investment banks, building once expansive, now diminished global investment banking businesses. Both now saw wealth management as their core activity and had striven for years to make cross-selling magic by investing entrepreneurs’ wealth and doing investment banking deals for them. Both banks — though latterly with divergent degrees of success — were sparing with capital, reluctant to lend except for a profitable opportunity.

Nearly everything Credit Suisse did was therefore something that UBS either also did or had decided it did not want to do. And UBS claimed it did not want to change its strategy. What, then, would it do with Credit Suisse? And what opportunities did this create for rivals?

UBS has described its plan only in outline, leaving market participants to fill in many blanks as best they can.

It was clear from the outset that, for all the excitement that surrounded two top investment banks combining, the merger has little to do with investment banking.

The term was mentioned only in the seventh bullet point when UBS announced the deal in March. Top of the list was creating a leading global wealth manager with $3.4tr of invested assets in wealth management and $1.5tr in asset management. Next came extending UBS’s lead in the Swiss market.

UBS would keep trying to grow in the Americas and Asia while “adding scale” in Europe and cut more than $8bn of annual costs from the combined business by 2027.

As for investment banking, Kelleher made it clear UBS would only be interested in the parts of Credit Suisse which fitted its existing strategy and that it would not be blown off course.

“A focused investment bank” would “support” wealth management. UBS would retain “strategic” banking businesses but sell off most of Credit Suisse’s trading assets. In essence, the takeover would allow UBS to accelerate the execution of its strategy by giving it growth through acquisition, rather than organically.

Little detail was given, even to insiders at managing director level, on which parts of investment banking UBS wanted to grow in this way. Observers have been able to work that out over the ensuing months, but more by watching the movements of staff than through anything UBS has said.

One area where the effects are plain to see is the Swiss franc bond market. Transparent, rapid in its activity and enjoying a cyclical boom, the market already shows a clear realignment of market share, with specific rivals having eaten up much of Credit Suisse’s once chart-topping business (see separate section).

Elsewhere, it is more difficult. Deals take longer to complete, the two Swiss banks’ shares are smaller and several markets of most interest to them are depressed. As the EMEA head of capital markets at one rival said of leveraged finance: “They have kept a small presence [from Credit Suisse’s franchise] but it’s not like we’ve seen a lot of new leveraged finance deals — it’s not like there’s a huge dataset to test that.”

For UBS, 2024 will be a pivotal year, as integration costs ramp up, while an expected recovery in investment banking activity gives it the chance to show its plan is working. Rivals will be circling, however, ready to swoop on any clients — or bankers — they think they can detach.

Eight months after the takeover, some major themes are becoming clear. UBS is trying to cherry-pick what it wants from Credit Suisse but has been only partly successful.

The exodus of bankers has been immense. In a great many cases, UBS was happy to see them go — it is a lot cheaper than making them redundant. But some stars have also slipped through its fingers. And UBS has also cut jobs at Credit Suisse systematically, moving from office to office.

And even where UBS wants to take parts of Credit Suisse’s business flow, it is not clear it has handled the transition in a way that will achieve its goals.

Announcing the Sfr3bn ($3.4bn) acquisition in March, Kelleher said risk-weighted assets at the combined investment bank would henceforth be capped at 25% of group RWAs. He and Ermotti have reiterated this several times. As of the third quarter of 2023, the actual figure was 19.6%, or 23% excluding the non-core and legacy division.

Before taking over Credit Suisse, UBS was running with this ratio at about 29%, below its self-imposed ceiling of 33%. That suggests the new UBS may not fully use the 25%.

However, if it did, that would enable an expansion of the investment bank’s balance sheet, since the group total RWAs will be larger, at $469bn as of September 30, 2023, excluding the non-core division, up from $320bn at the end of 2022.

Kelleher’s most clearly revealed priority for the investment bank was to expand corporate finance, especially in north America, an area of weakness since UBS’s retrenchment after the financial crisis of 2008.

Corporate finance at UBS, housed within global banking, includes mergers and acquisitions advisory, equity capital markets, debt capital markets and leveraged debt capital markets execution for corporate and financial sponsors. Clients are covered through a matrix of industry and country teams.

Kelleher’s words were an acknowledgement that UBS had fallen too far behind in corporate finance and wanted to catch up to the industry average.

Before the merger UBS’s corporate finance business produced 15%-20% of its investment bank’s revenue, compared with an average of 30% at its rivals.

GlobalCapital understands that by 2026, UBS wants global banking to generate 33% of IB revenues, driven primarily by expanding its US business.

UBS particularly wanted expertise in high growth sectors such as healthcare and technology, industries in which many of its wealth management clients invest and own assets.

With these aims in mind, Credit Suisse had some goodies that whetted UBS’s appetite. The strong point of its investment banking and capital markets (IBCM) division was north America, where it made the bulk of its revenues, in particular advising and lending to private equity firms. Its M&A business was stronger than UBS’s and its footprint in DCM, including leveraged lending, was bigger.

“Credit Suisse was always more aggressive in leveraged finance than UBS, which would typically participate at a more junior level on transactions,” says one private equity executive.

But UBS’s aspirations in investment banking did not mean it suddenly wanted to become Credit Suisse. Bankers from both firms say UBS took a “surgical” approach to which parts of its rival it would retain.

A UBS source said the firm had not “materially closed” any IBCM businesses. From the moment the deal was signed, UBS working groups were keen to find areas where Credit Suisse staff could plug gaps and cherry-pick whole teams that added to their offering.

But UBS was attempting something difficult: trying to keep selected bankers, while getting rid of most of them. In such an exercise, it is difficult to ensure you keep all the ones you really want.

Moreover, it was trying to perform surgery on a bank that had already started hacking off chunks of itself in 2022, as part of CEO Ulrich Körner’s turnaround plan.

Especially after the merger, Credit Suisse’s teams and bankers did not stand still waiting to be told whether they had a future at the firm. “UBS handled this transition badly,” says a former Credit Suisse banker. “There was radio silence — no one was talking to us.”

Rather than make bold, early statements that it wanted to keep certain teams and activities, UBS allowed Credit Suisse to keep haemorrhaging staff.

Just weeks after the deal was announced, Kelleher’s pledge to use Credit Suisse bankers to achieve growth in corporate finance appeared to ring hollow when UBS poached a team of senior US bankers from Barclays, led by Marco Valla, its head of technology, media and telecoms and consumer banking.

Valla was appointed co-head of global banking alongside Javier Oficialdegui, who is based in London. “In reality, UBS had little choice, as many of Credit Suisse’s senior US dealmakers had either already left, or were weighing offers from elsewhere,” says one headhunter.

A UBS spokesperson said UBS had been speaking to Valla since before the takeover and he was its first choice.

Nevertheless, when the acquisition was completed in June, nearly 200 managing directors moved from Credit Suisse’s investment bank to UBS’s, almost doubling its global ranks of MDs. They include markets and global banking staff.

UBS does not give a breakdown but GlobalCapital understands about 30 MDs in Europe have moved to UBS’s global banking business.

But UBS also implemented a programme of redundancies in July, cutting 200 front office investment bankers globally, including 80 in the UK. GlobalCapital understands UBS was working towards cost targets, not headcount numbers, and did not seek to achieve specific ratios of UBS and Credit Suisse staff.

For example, in the week beginning July 31, the axe fell on London, with very severe cuts in capital markets, credit trading and foreign exchange. Chris Tuffey, head of bond syndicate EMEA, Nick Koemtzpoulos, head of EMEA equity capital markets, and Mike Konstantinou, co-head of investment grade credit trading, were all among the managing directors who left.

“It seems UBS really didn’t want our global credit product business,” said a Credit Suisse banker at the time. “In the US, London and Asia there is a huge amount of overlap. We were hoping there would be some meritocracy in the cuts — some from us, some from UBS, but some of the best talent kept — but that doesn’t seem to have been the case. Credit Suisse bankers have just been completely taken out.”

Many more took the hint and headed for the exits. Deutsche Bank, Santander and Jefferies all completed ‘team lifts’ of CS bankers.

On November 8, UBS reported its first set of results that combined the two investment banking divisions. UBS will announce a new group strategy in February 2024, but Ermotti stuck to Kelleher’s mantra that there would be “no change” at the investment bank.

However, the strategy does seem to allow for some expansion, even in balance sheet.

UBS’s investment bank at the end of 2022 had $93bn of RWAs, 29% of the group total. That can be compared with the $150bn of RWAs in Deutsche Bank’s investment bank in 2022 and Barclays’ $271bn, at today’s exchange rates.

Under Kelleher’s pledge to limit investment banking RWAs to 25% of the total, UBS’s investment bank, of which global banking is a subset, would be able to carry a maximum of $137bn of RWAs, an increase of 47%, based on the September 2023 total RWA figure of $547bn.

If, as seems likely, the target is meant to exclude the $78bn of RWAs in the non-core and legacy division, the ceiling for the investment bank would be $117bn, still a 26% expansion.

However, UBS has a track record of keeping below its self-imposed ceiling, and at the end of the third quarter investment banking RWAs totalled $107bn, up $15.5bn since June.

UBS revealed that it had taken on just $12bn of RWAs from Credit Suisse’s investment bank, which at the end of June had $40bn. As shown in the table, UBS IB’s banking products have increased by $24bn in absolute, not risk-weighted, terms since June, or 35%.

One area where some extra lending capacity may be used is leveraged finance. UBS has no intention of becoming a big player, but it sees an opportunity to selectively scale up its activity as dealmaking returns.

“The integration of Credit Suisse gives us a bigger loan book and provides us with more firepower to use with our clients,” says Simona Maellare, global co-head of UBS’s alternative capital group, which covers private equity firms.

Credit Suisse was a lender to several of the portfolio companies owned by UBS’s private equity clients, so it can take this chance to deepen those relationships.

“To really optimise our sponsor focus, it comes back to a cohesive approach across sponsors, products and industry,” says Terry Sullivan, co-head with Maellare. “When we commit our resources, we want to make sure we have all those touch points.”

To that end, UBS has taken on some of Credit Suisse’s leveraged finance leaders. Marc Warm, who had been Credit Suisse’s global co-head of leveraged and debt capital markets in the US, is now joint head of UBS’s leveraged capital markets (LCM) and DCM businesses with David Slade in London, who had been running them solo for UBS.

In Europe, the merged LCM business is run by UBS’s Oliver Gaunt and Abudy Taha. But since the takeover, the team has grown from 25 to around 40 and it now has more capital firepower.

However, several senior members of Credit Suisse’s leveraged finance team have moved to Santander, including Eduardo Trocha, who ran European leveraged finance.

Some are sceptical that UBS will make much of a splash. “When it comes to areas like leveraged finance, the leading players will become more dominant,” says the head of investment banking at a rival firm. “Leveraged finance is one of those areas where incumbency is an advantage.”

In ECM, both Credit Suisse and UBS had been in multi-year declines, in a tough market. The two banks’ market shares in global ECM, added together, had fallen from 7.9% in 2016-19, which would have made them the top bookrunner, to 6.9% in the next three years, 3.9% in 2022 and 2.7% this year, though this year’s seventh position in the league table is one up from last year.

UBS had cut ECM jobs in EMEA only in April. Yet it has added staff from Credit Suisse in France and the UK, while in the German-speaking region it has made senior hires for equity-linked and cash coverage.

Omri Lumbroso, former head of UK ECM at Credit Suisse, has been appointed co-head of UBS’s private placements team, a business it wants to grow, which connects closely with wealth management.

As for its regional emphasis, UBS has moved quickly to retain Credit Suisse’s investment bankers where it sees most potential: north America, the UK, Germany, Switzerland, the Middle East and north Africa, India and southeast Asia.

The UK is a traditional area of strength for UBS, but it has also taken on two thirds of Credit Suisse’s investment banking team — around 20 people — and appointed Jonathan Grundy, a Credit Suisse veteran, to run it alongside David James.

Not only does the UK hold Europe’s biggest investment banking fee pool, but there is limited overlap between the two firms. UBS is strong in corporate broking while Credit Suisse is bigger in M&A.

UBS has increased its M&A team, where it has been underweight, with appointments in London from Credit Suisse including Stephen Pick, Ben Deary and Joe Hannon. Deary and Hannon both specialise in the UK.

In its sector teams, UBS has added Credit Suisse bankers in several groups. They include insurance specialist Kristian Triggle; Julien Lamm, Credit Suisse’s co-head of financial institutions EMEA in Paris; Marc Schmidt, CS’s former co-head of TMT EMEA; and Kyle Berry, an expert in business services.

For January-September this year, the merged UBS ranked seventh in Dealogic’s global investment banking fee league tables. UBS is back in the bulge bracket, from which it had slipped. But that rests just on adding the two former banks’ revenues together: it does not mean they can keep up the pace. Worse: in the same period of 2022, Credit Suisse plus UBS would have ranked fifth.

When the dust has settled, the combined bank may turn out to be less than the sum of its parts. UBS, after all, is going selectively for quality in its chosen areas, not bulk.

As one UBS banker admitted: “One and one doesn’t make two.”

Above all, UBS is pursuing the elusive goal of strengthening synergies between its corporate finance business and the ultra-high net worth individuals served by wealth management — just like JP Morgan, Goldman Sachs and many of the other leading investment banks.

By keeping its investment bank in a supporting role, UBS has opened the door for rivals to poach not just talent, but clients and mandates.

Rivals have been circling Credit Suisse’s clients since 2021, when it triggered a strategic review after losing $4.7bn from the collapse of Archegos Capital Management. The biggest impact fell on the global markets division, where Credit Suisse closed prime brokerage, weakening sales and trading.

Corporate financiers also jumped ship as they balked at the prospect of being punished for the mistakes of traders. “Back in 2022 there were a couple of clients where Credit Suisse said it would no longer lend, or where clients pre-emptively replaced it on its list of lenders,” says one rival.

While mandates and clients can follow talent out of the door, banks often try to “institutionalise” relationships by ensuring they have multiple points of contact with a client, reducing the importance of any individual. And new banks trying to establish ties with a client need more than a familiar voice on the phone.

So far, definite business wins from Credit Suisse’s stumble have been hard to detect, not least because there is a general slump in corporate finance activity. But competitors have not been idle, and especially those that have hired bankers from Credit Suisse will be looking for a return on their investment quickly.

“Yes, it has been a thing — our people looking to pick up business where Credit Suisse might have done stuff for [companies], absolutely,” says the head of capital markets at a major bank in London.

He highlights three areas. “They were quite good in corporate finance — M&A. You don’t necessarily need a balance sheet to be doing that. Corporate brokerships in the UK is an area where clients will need other banks to fill in. The third area is the Swiss franc bond business [see separate section below], where they were a major player.”

Over the summer, UBS asked Credit Suisse to step down as corporate broker to Imperial Brands because UBS has had a long broking relationship with its rival British American Tobacco.

UBS and Credit Suisse are joint brokers to Coca-Cola Hellenic Bottling Co, the Swiss-incorporated, London-listed soft drinks group. Banks are now pitching to replace CS.

Overall, by acquiring Credit Suisse, UBS has risen to third place by number of FTSE 100 brokerships. Several competitors including BNP Paribas are keen to grow in this business, but it will take time for companies to change their relationships.

How much the merger has really enabled UBS to grow in investment banking will only become clear when business gets going seriously.

“Only when clients start transacting will we see if they have retained UBS or not, or which of Credit Suisse’s clients UBS is willing to extend capital to,” says the head of investment banking at one bank.

The most obvious example of a rival benefiting is Jefferies, which has won an eye-catching mandate to advise the Italian government on selling a stake in Banca Monte dei Paschi di Siena.

This goes back to before the rescue. Credit Suisse was a longstanding adviser to the Italian government, but in mid-2021, after the Archegos affair, Jefferies hired CS’s global head of FIG investment banking, Alejandro Przygoda, and its European FIG investment banking team, led by Armando Rubio-Alvarez. Credit Suisse’s Italian team, headed by country CEO Andrea Donzelli, followed in December 2022.

Despite Jefferies’ advance, UBS has retained a slot as co-adviser to Italy. On November 20 this work bore fruit in a €920m block trade by the government to sell 25% of MPS. Jefferies was a global coordinator, alongside Bank of America and UBS.

With its eyes set on becoming a top five investment bank, Jefferies raided Credit Suisse again this year, hiring 20 bankers from its private fund group.

The struggle for Credit Suisse’s clients is going on in every section of the capital markets.

In supranational, sovereign and agency bonds, neither firm was a big player, though they are involved. The merger has not made any obvious difference yet. Their combined global market share of bookrunning SSA bonds in the 15 months to March 2023 was 1.1%, and since April it has risen to 1.4%.

The story in financial institution bonds is much more important and interesting, as both Credit Suisse and UBS were substantial players.

As the tables show, in both covered bonds and unsecured FIG bonds — leaving out Swiss francs, which we analyse separately, and Chinese bonds, which are dominated by local banks — combining the two firms’ market shares when they were separate banks would have made them a bulge bracket house.

Both had been losing ground before their merger in any case. But there was still a huge amount of value in Credit Suisse’s FIG franchise that UBS could in principle have taken over, greatly increasing its business.

A UBS banker argued the firm was an award-winning leader in FIG and “as a top three player you can’t win even more because there’s not room to increase, because of the share of wallet consideration.”

Certainly, no one would have expected UBS to capture all Credit Suisse’s flow, because there was a large overlap in clients. In covered bonds, where there is a limited number of issuers, 78.5% of Credit Suisse’s volume since 2019 has come from clients for which UBS also led covered bonds in the same period.

The combined FIG business, he said, would “look pretty much the same as the old UBS, with a slight touch on top”.

The unsecured FIG market is much broader — here, the overlap affected 60% of Credit Suisse’s volume.

But CS also had an impressive FIG client list that had not recently done deals with UBS. Mandates for them accounted for 40% of its third-party volume since 2019. They were mostly insurance companies, asset managers, private equity firms, leasing companies, stock exchanges, Reits, all of which Dealogic counts as FIG issuers, rather than banks. They included AerCap, Charles Schwab, Intercontinental Exchange, American Express, Warburg Pincus, BlackRock and Simon Property Group.

Some of these are big issuers. Since 2019, the total volume of the bonds they issued, using Credit Suisse as a bookrunner, was €178bn. “Most of those names are domiciled in the US — there are a lot of insurance companies,” says one former CS banker.

But despite the attractions of this business, UBS has held on to very little of it. Its market share in unsecured FIG has expanded by 0.6 percentage points, but only 0.19 of that has come from Credit Suisse.

Credit Suisse entities have bookrun just eight unsecured FIG deals since April 1, for €1bn of league table credit, including deals for Charles Schwab and Realty Income Corp.

Since 2019, Credit Suisse had led unsecured bonds for 114 FIG issuers that UBS did not serve in the same period. UBS as a combined bank has bookrun deals for only 12 of them since the merger.

“With insurance companies you win the business by lending,” said the UBS banker. “Then the question is how do we consider our lending portfolio? Ermotti has been very clear on not changing our capital-light model.”

The ex-CS banker put it more strongly. “UBS’s [FIG DCM] penetration in the US was limited to their desk doing self-issuance,” he says. “We had three exceptionally good bankers. [All of them] are gone. UBS is not going to pick up relationships with clients where they haven’t covered them historically, especially if no balance sheet is being extended to them.”

Arvind Sriram, who had been co-head of north American insurance at CS in New York, left in August and became head of insurance IB at TD.

Brian Carlin, another senior FIG banker, is now at Truist, and Ellery Kauvar, the third banker, moved to TD in July. However, George Matsuzaka, CS’s global head of insurance, is now running the team for UBS.

Meanwhile, since the takeover, the Credit Suisse subsidiaries have not led a single covered bond outside Switzerland.

UBS’s market share has also shrunk, although it has led deals for Santander and Danske Bank, which had only used Credit Suisse in recent years.

Shanx Tandon, head of FIG syndicate EMEA, and Mike McCormick, head of DCM advisory, had left Credit Suisse for BMO in February.

A former staffer said of the last days of Credit Suisse: “If you were any good, you said to your clients: ‘who should I call?’ They said ‘call Santander, BMO, TD or whatever, so they left the building.’”

One of the last senior bond bankers to go was FIG expert Khalid Krim, head of EMEA DCM and investment grade capital markets. He left in early October and joined Natixis in November.

While FIG banking for insurance companies requires some capital, arranging bond issues for other banks usually does not. “There’s a large element of reciprocity [between banks in awarding mandates to each other],” the banker said. “UBS were kings of that, and I think they’ll use that. But it doesn’t work with smaller banks and insurance companies. It’s not that they don’t want the business, but they haven’t got the resourcing. UBS is not in a hiring mood, so it’s an opportunity wasted.”

The eight months since Credit Suisse fell is a short time, and UBS may yet start leading bonds for more of its former clients. Asked whether UBS had lost the bulk of Credit Suisse’s FIG franchise, the UBS banker said: “It’s too early to call it — it’s an integration year. You need to see it [next year].”

But so far, the Credit Suisse UBS bought has done 91% less unsecured FIG business than in the same stretch of 2022, and 100% less in covered bonds.

Asked about opportunities from Credit Suisse’s tumble, corporate debt bankers in Europe are quick to emphasise that the bank was “not a big lender”. It had long seen itself as an “event-driven house”, aiming to advise on and finance mergers, acquisitions and other corporate actions, rather than everyday lending and bond financing.

Recently, hit by scandals, it had contracted still further. “Credit Suisse had let go of a lot of corporate relationships over the last two or three years,” says the head of capital markets at a major bank.

Even in leveraged finance, where CS was once a top five house, it had fallen to around 20th in Dealogic’s league tables for leveraged loans in all three world regions, though it remained top 10 in high yield. “We don’t really see Credit Suisse anymore [in leveraged finance],” the banker says. “They have kept a small presence.”

Despite all that, Credit Suisse at its fall still had shares of corporate debt markets around the world that were not to be sniffed at. Even in 2022 it had a 0.8% share as bookrunner of global syndicated loans, and over 2% of investment grade corporate bonds in both north America and Europe, putting it on the threshold of the big league.

And even if Credit Suisse had pulled out of many relationships, it is unlikely to have done that with many of those it had recently recommitted to.

In the last 15 months of its life as an independent bank, Credit Suisse participated as a mandated lead arranger on 294 syndicated loans in the Americas and 106 in EMEA, according to Dealogic.

But if Credit Suisse was tight with its capital, UBS is even more so. “UBS have publicly said they don’t lend,” said a former CS banker. “They’re cutting a lot of the clients CS had, so their large cap corporate profile is not going to improve. It’s not a core market for them. The M&A guys were hoping they could transfer some of the [loan] book in the US, and I think a couple of names will stick, but there are US and Canadian banks with excess capital, looking to grow their balance sheets. They will step in.”

In EMEA, of Credit Suisse’s 52 recent investment grade loans, UBS was in 19. In all those situations, unless for some reason UBS wanted to increase its capital commitment to the borrower, there was an opportunity for other banks to win a relationship.

Such overlaps are particularly common in Switzerland. “In Switzerland, clients are confronted with less choice of banking partners than previously,” says Reinout Böttcher, senior country officer at JP Morgan Switzerland. “In order to maintain well diversified banking relationships, clients seem to have become more open to exploring and establishing new banking relationships and to broadening and deepening existing ones. This not only creates opportunities in investment banking, but also for corporate and private banking.”

In Credit Suisse’s other 33 recent loans, as with every other CS client relationship, UBS will have to decide whether to try and keep it or not. It may not have reached decisions on all of them yet — but it is well known that UBS is much more parsimonious with its capital than Credit Suisse.

In all these cases, competitors had a chance to move in, even when UBS did want to take Credit Suisse’s place in the syndicate.

“It has provided opportunities for us to enter into new relationships with clients that we wished to have, that had been maybe closed off,” said a corporate DCM banker in western Europe.

With some corporate clients, an active process has begun to work out how to replace Credit Suisse in bank syndicates. The banker said some of CS’s revolving credit facility participations “might have got moved over to UBS, if UBS was not in the facility”.

But, depending on how the loan documents are written, the borrower would usually have the right to decide what it wanted to happen. It could even tell UBS it did not want to open a relationship with it.

“UBS has fewer products to offer than CS,” said the former employee. “If you’re extending a loan and RCF, companies want to know they can pay you [by awarding ancillary business]. You’ve got banks queuing round the block to do M&A and ECM, so unless you can offer other products — commodities, cash management, DCM — you’re [unlikely to succeed].”

UBS was trying to take over some CS relationships, he said, but it has not hired many of the bankers who had covered them for years. “Is a new banker from UBS going to build trust in a matter of weeks? I don’t think UBS will have the patience for that,” added the former employee.

If UBS does not take over a corporate loan the borrower can reduce the facility by the amount Credit Suisse provided, and invite other banks when it is time to refinance, or shrink the bank group permanently.

But there is also a process whereby a new bank would buy Credit Suisse’s position in a loan. “Corporate treasurers tend to have a number of substitutes,” said a rival banker. “If you have 10 relationship banks, you have somebody on the sidelines, or are aware of three or four others that have products or services you could benefit from. So if one goes, you go to them and say ‘there’s a spot: who wants to play?’”

His bank is close to finalising a new relationship with a blue chip European company, replacing Credit Suisse in its syndicate, and has looked at “a couple” of similar situations.

It can take three to five years for a bank to work its way into a position with a client where it stands a chance of picking up mandates like this when they become available. “It’s like bidding for a World Cup,” the DCM banker quips.

With rivals facing an uphill struggle to break into a corporate relationship, Credit Suisse’s new owner has the huge advantage of being in there already. Can it achieve Kelleher’s ambition of growing corporate finance, especially in the US?

Bob McMinn, head of Americas DCM, and Chris Murphy, a leading corporate bond MD, have stayed.

But, a former Credit Suisse banker says: “Your most expensive resource is capital. Ermotti has been very clear: he does not want to extend balance sheet. He doesn’t want the shareholders to see him growing the balance sheet in the investment bank. So whatever he does has to be below the radar. You can do it with personnel but you need to have a sales and distribution franchise in the US.”

As the charts analysing the primary capital market activity since the forced merger show, UBS has done better in some patches, such as US leveraged finance, than others, like US investment grade corporate debt. In Swiss francs, it is still the unchallenged leader. But the recurring picture in many sectors is that UBS has lost more than half the market share Credit Suisse still held, even in its last troubled months.

For UBS investment bankers, this is the wrong way round to look at it. What matters to them is growth from what the old UBS could do, not how much of what Credit Suisse had is retained. In Swiss franc bonds, for example, UBS’s business increased as soon as the merger was announced.

Asked whether, working at UBS, he felt the investment bank now had more capacity to lend and hold assets, a banker says: “On an absolute level there is the ability to increase. We will feel this very much as we go into 2024, and we have already felt it now.”

But this expansion in lending will not be evenly spread. It would not necessarily be used in FIG, he says, “and there is a question from a regional perspective about where we see the benefit. The US market always pays better fees and therefore gives better return. Then there is a consideration of the investment grade or high yield world. For return on capital you are probably better off in the high yield space.

“The combination of Credit Suisse and UBS for our US buildout in high yield,” he adds, “it’s very additive. In this regard I think the US will be very beneficial.”

UBS is sticking to its strategy in investment banking but further cuts and departures cannot be ruled out. It has continued to suffer losses, even in the parts of Credit Suisse it wanted to keep.

Tom Vignon, Credit Suisse’s former head of financial sponsors in EMEA, agreed to join UBS in August, but a month later he left for Barclays. Scott Bardo, co-head of healthcare in EMEA, who had also joined UBS, left to be Citigroup’s head of medical technology in October.

UBS’s September ranking as seventh in Dealogic’s IB fee league table, behind Barclays, may turn out to be a high watermark.

The former CS banker argued that, for all Credit Suisse’s failings and mistakes, in capital markets at least, “we had very good risk managers, whether in leveraged finance, ECM or DCM.”

From where he sits, UBS lacks both the desire and the wherewithal. “I really don’t think UBS is going to have a materially bigger capital markets franchise as a result of the merger,” he says. “Very few investment banking franchises will improve under UBS management. Their risk appetite is close to zero.”