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Activist investor Cevian Capital has taken a €1.2bn stake in UBS, betting that the Swiss bank can double its valuation over the next three to five years.
Cevian, Europe’s largest dedicated activist, has invested just under a tenth of its total portfolio in UBS shares since it rescued Credit Suisse in March, according to people with knowledge of the approach. Cevian is now a top-10 investor in the Swiss bank.
“This is the biggest opportunity in global financials,” Lars Förberg, Cevian’s co-founder, told the Financial Times. “UBS is valued like an average European bank, not as a leading global wealth manager. If the valuation gap to Morgan Stanley . . . is closed, the UBS share is worth SFr50 [$57.56].”
Unlike more aggressive US rivals, Cevian prefers to work behind the scenes with its portfolio companies. People familiar with the activist’s strategy said Cevian was not seeking a board seat at UBS and supported current chair Colm Kelleher and chief executive Sergio Ermotti.
Shares in UBS are up almost 50 per cent since it agreed to take over Credit Suisse, closing at just above SFr25 on Monday.
While UBS is one of Europe’s most valuable banks, it still heavily trails Wall Street peers. The Swiss lender trades at about 1.2 times tangible book value, compared with about two times for Morgan Stanley; both banks have large wealth management operations.
Previous activist campaigns at European banks have had mixed success.
At Barclays, Edward Bramson’s Sherborne Investors failed to convince other shareholders of his plan to shrink its investment bank during a three-year effort that ended in 2021.
When activist Knight Vinke called for UBS to split its wealth business from its investment bank a decade ago, it also struggled to win over other investors.
Last year Chinese insurer Ping An turned activist at HSBC, demanding a break-up of the bank. Although it was unable to attract enough support for that move, it did chalk up some smaller successes.
Cevian does have form in the sector, with previous investments in Danske Bank and Swedbank and an ongoing position in Nordea, the largest retail and corporate bank in the Nordics, where it has a board seat.
People with knowledge of Cevian’s view of UBS said the investor had tracked the bank for about 15 years. It had come close to taking an activist position in Credit Suisse before it collapsed, they added, but considered the investment too risky.
The activist believes UBS can be more profitable by increasing its focus on wealth management, especially in the US, where it lags Morgan Stanley, according to people familiar with Cevian’s approach.
Morgan Stanley has shrunk its investment bank since the financial crisis and concentrated on building its wealth management business, which generates steadier profits and a higher rating from investors.
“From an earnings and valuation point of view, UBS should really be seen as a wealth manager with a banking license, not a bank with a wealth management business,” said Förberg. “The notion that large companies can’t be changed is not right. There are many levers you can pull . . . we believe that UBS can become significantly more profitable over time.”
Other long-term investment groups have also increased their holdings in UBS significantly this year. US asset managers Fidelity and Capital Group between them raised their stakes by more than SFr1.5bn and are now top-10 independent shareholders, according to data from S&P Capital IQ.
UBS declined to comment.
