UBS Group AG (SIX:UBSG) (NYSE:UBS) is reportedly exploring the sale of Credit Suisse (SIX:CSGN)'s Chinese brokerage venture, following its acquisition of the latter. This move comes as the company faces an investigation by the US Department of Justice (DOJ) over potential compliance failures that could have allowed Russian clients to evade sanctions.
On Thursday, UBS reached out to a number of financial firms, including Warburg Pincus and Citadel Securities LLC, to solicit their interest in purchasing Credit Suisse's Chinese venture. The expectation for the bids is at least 1 billion yuan ($137 million), according to anonymous sources. The move follows UBS's acquisition of Credit Suisse, which has led to job cuts and trimming of overlapping businesses. UBS already controls a securities venture in China and can’t hold two licenses in the same business.
However, no offer has been made by Warburg Pincus as of now, and Citadel declined to comment. Earlier this week, Sergio Ermotti, the chief executive officer of UBS, stated that the bank was still evaluating its options regarding the Credit Suisse securities venture.
The potential sale comes amid an ongoing investigation into UBS and Credit Suisse by the DOJ over suspected compliance failures. On Wednesday, Bloomberg reported that the DOJ has stepped up its probe into both banks over suspicions they allowed Russian clients to evade sanctions. This news led to a sharp fall in UBS's stock price during intraday trading on Wednesday.
In addition to this, two law firms, Pomerantz LLP and Bronstein, Gewirtz & Grossman, LLC are investigating claims on behalf of investors of UBS. The investigations concern whether UBS and certain officers and directors have engaged in securities fraud or other unlawful business practices.
Despite these challenges, global companies have been expanding in China’s brokerage and asset management industries over the past few years, encouraged by policies allowing more foreign firms to have full ownership of their businesses. Credit Suisse had gained full control of its venture in China as authorities opened up the financial markets. It had agreed to buy out its China partner Founder Securities’s 49% stake for $160 million and had been waiting for regulatory approval to own 100%.
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