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UBS Group AG

UBSG: XSWX (CHE)
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Morningstar Rating for Stocks Fair Value Economic Moat Capital Allocation
CHF 67.70McjvbdXgygwqhlcn

UBS and Credit Suisse Integration Comes With Risk and Opportunities

Business Strategy and Outlook

The Credit Suisse takeover will be UBS' main focus for the foreseeable future. After the 2008 global financial crisis, UBS was in a similar position to Credit Suisse before its collapse. UBS' capital allocation was utterly lopsided, with 70% of its capital allocated to volatile, unprofitable investment banking activities. Over the next 15 years, UBS reduced the capital allocated to investment banking to 30% and shut down investment banking operations that did not support its core wealth management business. UBS halved its asset base and lopped 30% of its cost base while growing revenue. The consequent capital adequacy and profitability improvement allowed it to buy back 20% of its shares over the past five years. Now UBS will have to do this all over again.

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