Stockholm (HedgeNordic) – Swedish activist investor Cevian Capital has disclosed a €1.2 billion investment in UBS Group, asserting that the Swiss bank is significantly undervalued compared to its peers. Cevian Capital, known for its measured and behind-the-scenes approach to activist investing, sees “significant value potential in UBS” particularly following the Swiss bank’s takeover of its once-rival Credit Suisse.
“The board and management team are doing an excellent job integrating Credit Suisse and we have been impressed by their commitment to further improve UBS,” says Lars Förberg, Cevian Capital’s Managing Partner and co-founder. “Strengthened by the acquisition, UBS is the largest global wealth manager with unique market positions and financial strength,” he continues. Förberg highlights that closing the valuation gap to Morgan Stanley, based on a 2x price-to-tangible book value ratio, would value UBS shares at CHF 50, compared to the current share price of CHF 25.35 at the time of the announcement.
“The board and management team are doing an excellent job integrating Credit Suisse and we have been impressed by their commitment to further improve UBS.”
The Swedish activist firm, which was founded by Christer Gardell and Lars Forberg, adopts a strategy of “constructive activism,” concentrating on a select dozen companies at a time. Having invested about a tenth of its total portfolio in UBS, Cevian Capital now stands as a top-ten investor in the Swiss bank.
Despite the share price of UBS rising nearly 50 percent since agreeing on the takeover of Credit Suisse in March, it still trails its U.S. counterparts like Morgan Stanley, which boasts a market cap of $149 billion. The Swiss lender, with a market capitalization of $100.9 billion, trades about 1.2 times its tangible book value, compared to 2.2 times for Morgan Stanley. The team at Cevian Capital believes UBS can be more profitable by increasing its focus on wealth management, particularly in the United States, where it currently lags behind Morgan Stanley.
Following the financial crisis, Morgan Stanley strategically scaled down its investment banking activities and prioritized strengthening its wealth management business. This strategic shift serves as a clear example of an approach to achieve more consistent profits. Lars Förberg underscored this viewpoint, telling the Financial Times that, “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,” He challenged the conventional belief that large corporations are resistant to change, stating, “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.”
