UBS has successfully completed the sale of Credit Suisse’s securitized products division to Apollo Global Management.
This move is part of UBS’s strategy to divest non-essential assets following its acquisition of the troubled banking entity. Apollo will acquire $8 billion in “senior secured financing facilities” from UBS.
The transaction, announced on Wednesday, is anticipated to yield a net profit of approximately $300 million for UBS in the first quarter of 2024.
This agreement modifies a previously established deal between Credit Suisse and the U.S. private equity firm, initiated as Credit Suisse sought to restructure in an attempt to prevent its downfall.
“This mutually beneficial agreement aligns with UBS’s strategy of winding down and simplifying its non-core and legacy portfolio,” UBS stated, emphasizing the deal’s alignment with its goals for streamlining and reducing complexities within its operations.
Sergio Ermotti, UBS’s CEO, highlighted that this deal is instrumental in liberating capital tied up in non-essential activities, thereby simplifying the business and cutting costs.
The rescue of Credit Suisse was necessitated by a government-backed operation in March of the previous year, reflecting the critical condition of the bank before UBS’s intervention.
The transaction with Apollo has been positively received, indicating a smoother than expected integration of Credit Suisse into UBS, according to Daniel Bosshard, an analyst at Luzerner Kantonalbank.
Bosshard noted, “The early praise is now very high, which is reflected in a sharp rise in the share price in recent months,” yet he cautioned, “This leaves little room for disappointment.”
UBS’s stock has seen an 8% increase this year, although it experienced a slight drop of about 0.46% in early trading in Zurich on the announcement day.
Prior to this deal, Credit Suisse had initiated the winding down of its securitizing operations, including mortgage-related activities, planning for Apollo to manage approximately $20 billion of remaining assets still recorded on Credit Suisse’s books.
UBS confirmed it would keep any assets not transferred to Apollo, although the value of these remaining assets was not disclosed.