- Summary: In what appears to be series of 'copycat' moves dating back nearly a decade, Zurich-based Credit Suisse Group (CS) always seems to be just a step behind crosstown rival UBS AG (UBS). UBS bundled several smaller private banks into a separate wealth-management unit in February 2003 -- Credit Suisse plans to do the same next year. UBS shed its stake in an affiliated insurance firm in 1999 -- Credit Suisse sold its insurance firm this year, as well. Also, UBS said a few years ago it would concentrate its various businesses into an integrated banking model -- and surprise, surprise -- Credit Suisse has started doing just that with its three main divisions; wealth management for individuals, asset management for institutions and corporate-and-investment banking. There have been many other such copycat moves like Credit Suisse's decision to consolidate all its branches under a single name -- something UBS has already done. Both companies' shares trade for nearly the exact same price (71 and 70 Swiss francs, respectively) and both have outperformed the DJ Stoxx 600 banking-sector index in recent years increasing in value (by 60 and 63 percent, respectively). So is there any difference between the two? Yes, according to Wall Street analysts. Credit Suisse trades at 10-times expected 2006 earnings, less expensive than UBS shares, which trade at 13-times earnings. Credit Suisse's strategy is questionable according to Citigroup. Its investment bank has struggled to control costs, and some wonder how it will replace earnings once generated by insurance operations, which it sold in June, or how it is going to invest the proceeds from that sale. "All in all, it remains an act of faith for investors whether to believe in the financial targets for 2007-08," Citigroup said in a research note in August. Citigroup has a "hold" recommendation on Credit Suisse's stock, meaning it is risky. Merrill Lynch takes a more optimistic approach to the Swiss bank. "If we assume that Credit Suisse is probably where UBS was three years ago," then Credit Suisse's share price has room to grow, Merrill Lynch said in a research report last month that gave the stock a "buy" recommendation. In 2000, both UBS and Credit Suisse had stock-market values of about $52 billion each, according to Thomson Financial. But while Credit Suisse made strategic missteps, UBS expanded brilliantly. The result: UBS's market cap today is about $120 billion, compared with Credit Suisse's $70 billion.
- Comment on related stocks/ETFs: Despite the glaring similarities between Credit Suisse and UBS, UBS is the far more heavily traded stock in the U.S. with an average daily volume nearly 6 times greater than Credit Suisse. For more in-depth coverage of UBS, Travis Johnson looks at the Swiss Bank's valuation, analyzing its positive EPS as well as the company's recent expansion into China.
Seeking Alpha is not affiliated with The Wall St. Journal.