Credit Suisse (NYSE:CS) seems to have worked out its options properly over the last 2 months, since it was instructed by Swiss regulators along with rival UBS (NYSE:UBS) to raise core capital levels. That would explain the second-largest Swiss bank’s decision to expand its business overseas through strategic acquisitions. After Credit Suisse’s recent decision to substantially reduce its sales & trading operations following the stricter capital requirements, the bank is clearly looking to make up for the resulting revenue loss by growing its wealth management and private banking businesses inorganically. Credit Suisse followed up its decision to acquire HSBC’s Japanese private banking business by initiating talks with Sacombank to buy as much as 15% stake in the Vietnamese bank. [1] (Vietnam’s Sacombank May Sell 15% Stake to Credit Suisse, Bloomberg, Dec 21 2011)) Read on for details about these deals and their impact on Credit Suisse’s value.
We maintain a $33 price estimate for Credit Suisse’s stock, and attribute the near-40% premium to the current market price to the pessimistic outlook for banking stocks in the wake of economic slowdown and deteriorating European debt crisis.
See our complete analysis of Credit Suisse here
Credit Suisse has entered into a definitive agreement with HSBC to acquire its Japanese private banking business, and the deal is expected to be completed in Q2 2012. The amount Credit Suisse has agreed to shell out for the business has not been disclosed. The acquired business will add about $2.7 billion in assets to the bank’s private banking asset pool, and will complement Credit Suisse’s current private banking offerings in the Asian country while substantially increasing its client base. [2]
Integration of the existing and acquired business is also expected to boost profitability. Japan ranked only behind the U.S. when it came to growth in the size of wealth amassed by the country’s millionaire club in 2010. [3] And the acquisition provides Credit Suisse better access to this growing market.
Credit Suisse is also keen on gaining entry into the under-tapped Vietnamese market through an investment in the Saigon Thuong Tin Commercial Joint- Stock Bank, commonly referred to as Sacombank. While negotiations are expected to start next month, Sacombank is eager to sell as much as 15% stake to Credit Suisse – the highest amount of stake permissible for foreign firms according to existing laws in Vietnam.
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Notes:- Credit Suisse to Acquire HSBC’s Private Banking Business in Japan, Credit Suisse Press Release, Dec 21 2011 [↩]
- HSBC Holdings to Sell Japanese Private Banking Business to Credit Suisse, Bloomberg, Dec 21 2011 [↩]
- ref:3 [↩]
