Call it a coincidence or a stroke of luck, but the word “crisis” perfectly sums up the UBS AG Group’s imminent return to the Indian banking sector.
A brief about 63% fall in Credit Suisse shares after temporary relief from rescue
The Swiss-based UBS AG received positive news about its permission to operate in the Indian banking sector from the Reserve Bank of India (RBI) at the height of the 2008 global financial crisis, when hundreds of foreign banks failed. The RBI’s requests for clarifications caused a delay in the issuance of the licence to operate as a branch model.
But after nearly ten years of running a single branch in India, UBS made the decision to leave the country’s banking sector. In January 2016, it gave the RBI its licence. UBS made the decision to depart the Indian banking sector as part of its global strategy to concentrate on its strengths.
Like other global banks, the powerhouse of global banking experienced problems following the 2008 global financial crisis. In order to shift its emphasis away from investment banking and towards other sectors like private banking, foreign exchange, advisory services, and capital-light assets, the bank started a massive reorganisation initiative in 2011.
There were no India-specific problems that led to the departure from India. In reality, the US-based Citibank recently withdrew from 13 regions, including India, in order to concentrate on its core competencies and save money for expanding its operations internationally. Axis Bank, a private institution, recently purchased Citi’s Indian consumer division.
UBS Group’s second encounter with India comes at a time when the world’s financial system is in disarray as a result of rising interest rates and a generalised recession. With its decision to pay $3.25 billion to acquire the struggling Credit Suisse, UBS has once again entered the Indian banking sector.
With a banking licence, Credit Suisse India provides wealth management, investment banking, and brokerage services and maintains a negligible presence in the nation. Its deposit base was Rs 2,800 crore as of March 2022, with Rs 947 crore in loans and advances, Rs 804 crore in total revenue, and Rs 303 crore in net profit. For the past three years, the company has been losing money.
Everyone is now wondering if UBS will decide to give up the Credit Suisse licence in India. The Indian unit had a good capital adequacy ratio of 60.02 percent as of March 2022, which is significantly higher than the average for Indian banks.
This is as a result of the Indian division’s primary emphasis on wealth management and other service-based products. This suggests that there is no immediate need for raising further money. If UBS does decide to leave, it will probably do so as a result of the bank’s global plan to move away from fixed-income operations and into businesses with fewer assets.
“For a change of control at Credit Suisse India, the global bank must submit an application to the RBI. This procedure will take some time as the RBI reevaluates the new promoter’s background “a consultant with experience in mergers said.
The banking division of Credit Suisse and UBS Securities could be combined as a potential strategy for UBS. Throughout the 1990s, UBS has had a securities broking and advising business in India.
There are connections between UBS Securities and the Credit Suisse India division. During India’s reform process in the 1990s, this unit was founded, and since then, it has played a significant role in providing advice to international investors considering investments in the Indian capital market. The expert adds, “This will also need the approval of the NCLT and other securities authorities.
India serves as the back office for UBS Business Solutions AG, a division of UBS Group AG.