UBS weighs Credit Suisse China stake swap with Beijing government

UBS Group is in discussions to attain full ownership of its China platform by swapping its holding in Credit Suisse’s onshore securities venture with a Beijing government investment fund, according to sources familiar with the matter.

The Zurich-based lender is proposing to buy its remaining 33 per cent stake in UBS Securities from Beijing State Owned Assets Management and in return sell up to its entire 51 per cent position in Credit Suisse Securities (China) as part of the transaction, the sources said, asking not to be identified discussing a private matter.

The latest proposal is adding a new twist to the months-long bidding process of Credit Suisse’s investment bank in the world’s second-largest economy, with Chinese billionaire Jack Ma-backed Ant Group vying with Ken Griffin’s Citadel Securities. For UBS, selling the Credit Suisse venture to the Beijing government would deflect a strong global player such as Citadel, which is skilled at market-making and trading execution, one of the sources said.

UBS put the Credit Suisse venture up for sale after taking control of its smaller Swiss rival when it collapsed last year. Under Chinese rules, a foreign shareholder cannot hold majority stakes in two domestic brokerages simultaneously. UBS has already controlled 67 per cent of its own UBS Securities since 2022.

While UBS has previously attempted to increase its ownership to 100 per cent, the Beijing government has been reluctant to sell due to the onshore business’s growth and earnings prospect, according to the sources.  

Spokespeople at UBS and Citadel declined to comment. Beijing State Owned Assets Management and the China Securities Regulatory Commission did not respond to requests for comment.

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UBS is now running a dual-track process, engaging in talks with its state-owned shareholder to swap shares while holding advanced talks to sell Credit Suisse Securities to Citadel Securities, the sources said. However, both suitors present regulatory hurdles, they added.

For one, Chinese government may not be keen having a state-owned firm assume control of the foreign-owned brokerage and instead could favour a foreign buyer because the securities licenses were originally awarded to Credit Suisse as part of efforts to open up the financial sector. It is also at odds with China’s years-long effort to consolidate the overcrowded brokerage industry, the sources said.

While the worsening US-China tension does not bode well for Citadel Securities, President Xi Jinping has softened his stance, inviting American business leaders including Citadel Securities chief executive officer Peng Zhao to a small group dinner in Beijing in late March. It was the second time Xi addressed the US business leaders after the November meal on the sidelines of the Asia-Pacific Economic Cooperation meeting in San Francisco, where Citadel Securities was also present.

Citadel Securities, the only global bidder for Credit Suisse’s China platform, is seeking to turbocharge its presence in China with a broader footprint spanning asset management under a securities platform, brokerage execution, financial advisory and market-making, one of the sources said.  

UBS has been seeking around two billion yuan (S$380 million) for the entire Credit Suisse China unit, including the stake held by its local partner. Citadel Securities submitted a bid in late December at about 1.5 billion to two billion yuan, lower than an offer presented by Ant Group, sources said at the time.

Before Credit Suisse collapsed last year, the Swiss bank had agreed to buy out the remaining 49 per cent stake from its Chinese partner for 1.14 billion yuan, valuing the firm at about 2.3 billion yuan, one of the highest figures ever assigned to such a platform in the country. The agreement was nixed after the UBS takeover. BLOOMBERG