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Credit Suisse to Merge Investment Fund Unit With Allfunds

Zacks Equity Research

Credit Suisse Group CS has announced plans to merge its business-to-business investment fund platform, Credit Suisse InvestLab, with a leading institutional fund distribution network — Allfunds Group.

With assets under administration (AUA) of about CHF 430 billion, Allfunds’ distribution network offers above 78,000 investment products to financial institutions across more than 45 countries.

Post-completion, Credit Suisse will become a minority shareholder with 18% interest in the combined business. Also, the Swiss bank plans to use this new platform to distribute mutual funds and ETFs.

Deal Terms

All shares in Credit Suisse InvestLab, along with the service agreements and the related distribution agreements of Credit Suisse, will be transferred to Allfunds Group. Per the terms, Credit Suisse will have representation at the board.

Notably, the deal is subject to customary closing conditions, including anti-trust and regulatory approvals. The company expects to complete transfer of Credit Suisse InvestLab in third-quarter 2019. Further, transfer of the related distribution agreements by Credit Suisse is expected to be completed in first-quarter 2020.

Benefits From the Transaction

The deal will combine assets of both the entities to create a global fund distribution platform with about CHF 570 billion AUA.

With this deal, the company plans to boost offering to the asset managers and distributors on a global level by taking advantage of the its own global wealth management footprint and the technological innovation of Allfunds.

Upon expected closing in the third quarter, the deal is likely to show a limited regulatory capital benefit, and result in a 0.5% increase in return on tangible equity for 2019.

Our Take

Credit Suisse remains focused on bolstering its wealth management business with support from its wealth-centric strategy that includes broadening key client relationships along with building asset-based and recurring income streams for higher stability.

Also, it successfully completed the three-year restructuring overhaul in 2018 and seeks to reap benefit from it.

The stock has gained 11.9% over the past six months compared with 9.7% growth recorded by the industry it belongs to.

Currently, the stock carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other top-ranked stocks in the same space include Macro Bank Inc. BMA, Banco Latinoamericano de Comercio Exterior, S.A. BLX and HSBC Holdings plc HSBC.

Zacks #1 Ranked Macro Bank’s earnings estimates for 2019 have remained stable in the past seven days. Its share price has risen 46.2% in the past three months.

Banco Latinoamericano’s shares have gained nearly 1% in three months’ time. Its earnings estimates for 2019 have moved up 4.5% in the past 60 days. The stock currently carries a Zacks Rank of 2.

The Zacks Consensus Estimate for the current year for HSBC Holdings, carrying a Zacks Rank #2, has been revised 2% upward in the past 60 days. The company’s share price has jumped 1.2% in the past three months.

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