UBS Group AG is currently exploring a strategic move to gain full ownership of its China operations by negotiating a stake swap involving its interests in Credit Suisse’s onshore securities venture and a Beijing government investment fund. According to sources familiar with the discussions, UBS is proposing to acquire the 33 percent stake held by Beijing State-Owned Assets Management Co. in their joint venture, UBS Securities Co. In exchange, UBS may sell part or all of its 51 percent stake in Credit Suisse Securities (China) to the Beijing government fund.
This latest proposal adds a new dimension to the ongoing bidding process for Credit Suisse’s investment banking operations in China, where major players are competing for a slice of the lucrative market. Notably, Chinese billionaire Jack Ma-backed Ant Group Co. and Ken Griffin’s Citadel Securities LLC are among those vying for the opportunity. For UBS, selling its Credit Suisse venture to the Beijing government would help mitigate competition from a formidable player like Citadel, known for its expertise in market-making and trading execution.
Background and Strategic Importance
UBS decided to put the Credit Suisse venture up for sale after taking control of its smaller Swiss rival following its collapse last year. Under current Chinese regulations, a foreign shareholder is prohibited from holding majority stakes in two domestic brokerage firms simultaneously. Since 2022, UBS has maintained a 67 percent control of its own UBS Securities, which further complicates its ownership structure in the region.
Despite previous attempts to increase its ownership stake to 100 percent, UBS has faced resistance from the Beijing government, which is reluctant to divest its stake due to the onshore business’s potential for growth and profitability. Sources indicate that discussions are ongoing, but the landscape is fraught with challenges.
Spokespeople for both UBS and Citadel declined to comment on the negotiations, while Beijing State-Owned Assets Management and the China Securities Regulatory Commission did not respond to inquiries.
Dual-Track Approach
Currently, UBS is pursuing a dual-track approach. On one hand, it is engaging in talks with its state-owned shareholder to negotiate a share swap, while simultaneously advancing discussions to sell Credit Suisse Securities to Citadel. However, both options present regulatory hurdles that could complicate the process.
For instance, the Chinese government may be hesitant to allow a state-owned firm to assume control of a foreign-owned brokerage, favoring a foreign buyer instead. This perspective aligns with China’s broader strategy to open up its financial sector, a move that began years ago to promote international investment. Additionally, the Chinese authorities are working to consolidate the overcrowded brokerage industry, further complicating UBS’s plans.
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Impact of US-China Relations
The ongoing deterioration of US-China relations poses a significant challenge for Citadel Securities. However, in a recent shift, President Xi Jinping has softened his approach, inviting American business leaders, including Citadel’s CEO Peng Zhao, to private dinners in Beijing. These meetings signify a renewed openness toward foreign investment in the wake of heightened geopolitical tensions.
Citadel Securities stands as the only global bidder for Credit Suisse’s China platform, aiming to strengthen its presence in the market with an expanded footprint that encompasses asset management, brokerage execution, financial advisory, and market-making services. The firm’s ambitious plans indicate its commitment to capturing a more significant share of the growing Chinese financial market.
Financial Proposals and Valuation
UBS is reportedly seeking around 2 billion yuan (approximately $278 million) for its entire stake in the Credit Suisse China unit, which includes the share held by its local partner. In contrast, Citadel Securities submitted a bid ranging between 1.5 billion yuan to 2 billion yuan, which is lower than an offer made by Ant Group. Prior to Credit Suisse’s collapse, the Swiss bank had struck a deal to buy out the remaining 49 percent stake from its Chinese partner for 1.14 billion yuan, valuing the venture at approximately 2.3 billion yuan—one of the highest valuations ever assigned to such a platform in China.
As UBS continues to navigate the complex regulatory environment and the competitive landscape, the outcome of these discussions will be critical for its strategy in China and its broader ambitions in the global financial market. The situation remains fluid, and stakeholders will be closely monitoring the developments as UBS seeks to secure its foothold in one of the world’s most dynamic economies.
