Swiss banking shake-up: where top managers stand

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Two of Switzerland’s major banking institutions – UBS and Credit Suisse – have announced drastic restructuring in recent weeks but how have fund managers responded to these changes?

Both investment banks set out major plans to improve their operating models and, in the case of UBS, divest themselves of poor performing parts of their business. But have fund managers sought to capitalise on these changes?

Going long

In the immediate aftermath of UBS announcing its restructuring plans, Henderson’s Paul Casson revealed he had made the Swiss bank the number one holding in his long/short equity fund, the Henderson HF Pan European Alpha fund.

‘Now we can go back to looking at a business which is much more predictable, much more transparent and it has come through the financial crisis in very good shape,’ said the Citywire Alternative Ucits A-rated manager.

UBS now represents 3.5% of the €193 million fund, with Casson having previously warned against the dangers of investing in European financials.

Short selling

One European long/short equity manager, who wished to remain anonymous, said he was seriously considering a short bet on Credit Suisse following the investment banks structural changes.

He said: ‘We don’t think that the management get it, they don’t know what they are trying to do. When you compare it to UBS, their shake-up made sense. With Credit Suisse, one – it is not enough really and two – why have they decided to do it now?’

The fund manager said he had avoided financials in general in his fund but Credit Suisse was proving a tempting proposition given the lack of clarity in what they are trying to achieve.

‘In banking, without getting too conceptual, it is about the philosophy, so if management understands what it is trying to achieve, even if it looks difficult, then you can support them and buy the shares. But if they are in denial of a wider problem, then you cannot support that.’

Wait and see

One manager biding his time when it comes to Swiss banks is Polar Capital’s Nick Brind. The Citywire A-rated manager said he is weighing up whether to add long positions in either UBS and/or Credit Suisse to his $76 million Polar Capital Financials Income fund.

‘I am looking at these names because I do think both companies have made significant changes and there has been this issue across European banks of them trading below book value and the whole issue of making a decent return on invested capital,' he told Citywire Global.

‘But in terms of this cost-cutting, getting rid of the line of business which is not improving, that is about overall improvement of the business as a whole and that is a much more long-term story.’

Brind said the level of ‘transformative change’ shown by both banks could put pressure on fellow investment banks to follow suit and prioritise returns on invested capital.