Adviser-to-client template: Credit Suisse

For financial advisers to use with clients.

This document is intended to support your service proposition to clients. It is produced by our investment writers with a deliberately light tone and structure. However, these are guidance paragraphs only. It is not guaranteed to meet the expectations of regulators or your internal compliance requirements. If you wish to remove or amend any wording, you are free to do so. However, please bear in mind that you are ultimately responsible for the accuracy and relevance of your communications to clients.


Dear Client,

By now you’ve likely heard of Credit Suisse being sold to UBS, and probably have some questions about how this impacts your portfolio. I’ve laid out some of the key points below, but perhaps most importantly, Morningstar, our investment management partner, either had no meaningful exposure to Credit Suisse (in SMAs) or have cleared the portfolios of exposure ahead of the sale (real return funds).

The background:

Credit Suisse had long been a major player in financial markets across their investment bank, wealth management, asset management and Swiss banking units. In recent years, they have had a significant fall from grace, culminating this past week in being purchased by their long-term rival UBS for next to nothing. The deal was effectively forced on them by the Swiss authorities to stop the likelihood of a banking crisis after a series of fast-escalating events, including:

  • Indicating they had “material weakness” in their financial reporting and frameworks
  • Major shareholder would not provide additional capital to the business
  • Credit Suisse said it would borrow up to 50 billion from the Swiss bank.

The latter provided short-term relief before the transaction with UBS was announced over the weekend. It’s worth noting that while the business changed hands very quickly, Credit Suisse has been a business plagued with issues in recent years. There have been continual changes in management, tax evasion fines, a struggling investment banking franchise, and corporate espionage. These factors combined have meant significant weakness in the share price, and have overshadowed the value in the wealth management, asset management and Swiss banking units. 

Below, I’ve included a note from our investment manager, Morningstar Investment Management, explaining their portfolio positioning and how it’s set up to serve you in the long term.

Morningstar’s position:

Morningstar Investment Management Australia’s real return funds held a position in Credit Suisse which was sold on the short-lived bounce prior to the UBS deal being announced.

Though the sale to UBS is not necessarily a positive outcome for Credit Suisse, it’s been an exercise in the importance of diversified holdings – one of Morningstar Investment Management’s core investing principles. Our portfolios are built to have exposure to a wide range of securities, asset classes and themes, so that when things like this do happen, it doesn’t derail investors’ chances of meeting their financial goals over the long term. We note as well that the SMAs have never had any meaningful exposure, and this information is specific to Morningstar’s real return funds.

Could this spread to other banks?

For the majority of investors, this is the biggest question. We’d argue that while the rapid rise in interest rates has caused some short-term losses for the banking industry that are meaningful, industry capital levels are better positioned to weather the storm. The Reserve Bank of Australia have released a statement that while they are closely monitoring the situation in the US, Australia’s banks in contrast are strong and are subjected to a different set of regulatory frameworks, are well capitalised and already meet APRA’s strong benchmarks.

Though it was materially different than the current bank runs with regional banks, the Global Financial Crisis in 2008 demonstrated how the fragility of banks can impact the broader economy and asset prices around the globe. With this episode uppermost in people’s minds, it is somewhat understandable that market participants react strongly to any perceived weakness in the banking sector. However, the strength of this reaction is not always a good guide to the seriousness of the situation.

How is the investment team at Morningstar reacting to this news?

As ever, we are prioritising research over reaction. We are very fortunate at Morningstar to have specialist banking analysts within our company, together with members of the investment team that focus on valuing banks across the globe.

As your adviser, I’m here to support you in your financial journey. If you’d like to discuss these events, or how they fit in the context of your long-term financial plan, please do reach out – I’d be delighted to talk.




Important Information
As noted previously, this document is intended to support your service proposition to clients and the commentary does not constitute investment, legal, tax or other advice and is supplied for information purposes only. Past performance is not a guide to future returns. The value of investments may go down as well as up and an investor may not get back the amount invested. The information, data, analyses, and opinions presented herein are provided as of the date written and are subject to change without notice. Every effort has been made to ensure the accuracy of the information provided, but Morningstar makes no warranty, express or implied regarding such information. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or losses resulting from, or related to, the information, data, analyses or opinions or their use.