UBS pays premium to woo clients

UBS is making efforts to attract customers by offering deposit rates that exceed the market average, a move aimed at increasing inflows following its takeover of Credit Suisse, a struggling peer.

Clients who deposit their funds at Credit Suisse, which is now under the UBS umbrella, can earn approximately 1.8 percent interest on deposits exceeding 50,000 Swiss francs held for three months. This information comes from an anonymous source familiar with the matter.

In comparison, Zuercher Kantonalbank offers a 1.34 percent interest rate on similar deposits with a minimum investment of 100,000 francs, while Raiffeisen provides a 1.2 percent interest rate, according to spokespeople from these banks.

Credit Suisse responded to the matter by stating, “As is common in the market, there may be specifically tailored offers that can also depend on an overall client relationship.” UBS, however, declined to comment on the three-month deposit rates but did mention offering a fixed rate of 1.75 percent for a one-year lockup as part of an ongoing campaign.

Credit Suisse experienced significant client fund outflows that brought it close to collapse, leading to its merger with UBS. Regaining client trust and funds in Switzerland is essential for UBS, which now manages assets worth $5.5 trillion for affluent clients. The bank also needs to retain clients who may have had funds in both banks and are now looking to diversify their risk.

JPMorgan analyst Kian Abouhossein identified outflows from Credit Suisse’s wealth management business as a key risk for UBS. Abouhossein suggested that higher deposit rates might be used to limit these outflows at Credit Suisse, potentially impacting the bank’s revenue growth.

Despite these challenges, Abouhossein also noted that UBS has the potential to recapture a portion of the nearly $500 billion in deposits and assets that left Credit Suisse over the past two years. In the second quarter, Credit Suisse reported net asset outflows of 39 billion francs, but UBS reported that the outflows had slowed down and reversed in June, with Credit Suisse reporting net deposit inflows of $18 billion in the same quarter.

Sergio Ermotti, the CEO of UBS, has expressed his intention to regain the assets previously held by Credit Suisse, emphasising the importance of winning back clients and resetting their starting point for future growth aspirations.