Jay Sole, a sell-side analyst at UBS, is one of the top-rated researchers covering retail and department stores — does the investment bank also need his Credit Suisse rival, Michael Binetti? Similarly, if Moshe Orenbuch at Credit Suisse is the top-rated analyst covering consumer finance, does UBS need another well-paid senior researcher doing similar work?
Those are just two of the questions about equity research that UBS leadership will likely face now that it has acquired Credit Suisse, an advantageous move by UBS to avert the failure of its competitor.
The deal closed this week, and UBS has already made some leadership changes and begun the long process of folding Credit Suisse in. Few details have been shared publicly about that process, which is expected to take more than a year to complete. “The integration of the businesses and legal entities will take time,” UBS Group CEO Sergio Ermotti said in May.
For now, UBS and Credit Suisse are operating independently, but that won’t be the case forever. “Instead of competing, we’ll now unite as we embark on the next chapter of our joint journey. Together, we’ll present our clients an enhanced global offering, broader geographic reach, and access to even greater expertise. We’ll create a bank that our clients, employees, investors, and Switzerland can be proud of,” Ermotti said after the deal closed.
The unification will likely mean job cuts in businesses that overlap, and that includes equity research, something that both firms do very well. UBS and Credit Suisse were both among the top-10 rated firms in Institutional Investor’s All-America Research Team (UBS ranked sixth and Credit Suisse ranked eighth).
There are dozens of analysts doing similar work at UBS and Credit Suisse — namely, compiling data and publishing reports on hundreds of publicly traded companies. And in the competitive world of sell-side research — where significant shifts in the rankings rarely happen — firms can’t justify the cost of employing two star analysts who are covering the same things.
“It’s not often that two big banks get together where they’ve got such a large overlap,” said David Enticknap, head of Institutional Investor Research. He added that UBS won’t keep all of the research analysts.
UBS declined to comment for this story.
Even if Credit Suisse analysts cover a sector or companies that UBS doesn’t, UBS still might not keep them. Equity research isn’t the most profitable area of investment banking, especially since the European Union’s MiFID II — which unbundled trading commissions and investment research — went into effect in January 2018. Unless a firm believes that adding analysts will help it grow its subscriber base, there’s little incentive to spend money on an expansion.
In 2022, UBS analysts were ranked among the top three across 74 sectors globally, according to II’s Global Research Leaders. Those analysts’ jobs won’t be in danger, but if there are any underperforming UBS analysts, the bank now has a stable of Credit Suisse analysts to choose from. “Anyone who isn’t doing well might be looking over their shoulder wondering if the CS guy is better,” Enticknap said.
Some Credit Suisse analysts are already exploring their options, and according to Enticknap, they’ll have opportunities. Other sell-side research firms, such as Jefferies and Barclays, have already been hiring and expanding.
Some analysts could also end up on the buy side doing research for an asset manager, said Max Heppleston, the executive director of investment management at Lawson Chase, an executive search and recruiting firm for investment firms.
Heppleston said that few will end up at hedge funds or in other parts of the industry, where there are a limited number of open positions (many of which are higher-paying) and companies can recruit more specialized candidates. He added that overall, hiring at investment firms is picking up but is still competitive.
