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The Case for Credit Suisse and UBS

Let’s start with the facts. Both banks have endured significant setbacks, including writedowns, tax evasion chargesmoney outflows and a government bailout that certainly tarnished the image of infallibility synonymous with Swiss banks. And yet, the two brands continue to dominate the ultra-high net worth space. Together Credit Suisse and UBS also account for 50% of all Swiss banking assets, giving both banks a huge competitive advantage in terms of size and expertise.

What really matters, of course, is where things stand today. In the case of Credit Suisse, the bank continues to generate net inflows at a time when most banks are experiencing net outflows. Moreover, Credit Suisse is expected to grow earnings by double digits in 2019, making the stock a bargain at current levels.

By all accounts, the two banks have transformed their business models by refocusing on wealth management and private banking. The challenge ahead is to continue to attract the super rich while shutting down riskier operations such as trading. UBS has done a better job, but Credit Suisse is not far behind.

And here is the thing, the super rich are getting richer and more billionaires are joining their ranks. Where do they look to park their money? Switzerland! A stable and neutral place where money is king. That’s pretty much the case for owning both stocks. Sure, their reputations might have suffered a few indignities, but both banks remain highly respected institutions, ranked among the world’s best. Swiss regulators are also strict, and the Swiss National Bank’s requirements exceed those of the Basel accord and the European Banking Authority.

 

Disclosure: Long CS

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