UBS bets on the US

0:02Good morning from the Financial Times. Today is Thursday, July 2nd, and this is your FT News briefing. The U.S. government might get a piece of an AI powerhouse, and UBS is dipping its toes in American banking services. Plus, Ukraine has pushed Russia onto its back foot, and even Vladimir Putin is starting to acknowledge it. I'm Mark Filipino, and here's the news you need to start your day.

0:34OpenAI has discussed giving a 5 % stake to the U.S. government. That's according to people familiar with the talks. The arrangement would involve other American AI companies handing over a similar stake, but it's not clear if those other companies would be willing to play ball. The move could help OpenAI improve its relationship with the Trump administration. it would also be an attempt to address political blowback. The American public and politicians have gotten more concerned about all the data centers being built and the impact AI could have on the job market. The idea is that the deal would share the wealth generated by AI with the public.

1:09OpenAI declined to comment on this, and the White House did not immediately respond to a request for comment.

1:21UBS is expanding in the United States. The Swiss lender will start testing out everyday banking services for its employees in the U.S. The plan is to launch a full-service bank for wealthy Americans by the middle of next year. That's according to people familiar with the matter, but UBS declined to comment. These plans come as UBS and the Swiss government are still in a standoff over tougher capital requirements, and a few years after UBS took over its main rival, Credit Suisse, as part of a rescue deal. I have with me VFT's Switzerland and Austria correspondent Mercedes Ruhl. Hi, Mercedes. Hello.

1:57So tell me a little bit more about what UBS is offering and planning to offer in the U.S. UBS wants to become much more than just an investment manager in the U.S. So what UBS is doing is preparing to become a full-service bank for Americans. So over the next few months, sources have told us it's going to start testing everyday banking products, checking accounts, saving accounts, other services with its own U.S. employees before rolling them out to clients from the middle of the next year. And this is the first time UBS will be able to offer Americans both investment advice and everyday banking through the same business.

2:34Did UBS say anything about why it's doing this? So the problem that UBS has at the moment is that it's often not its client's main bank, and they want to be the client's main bank. So not just the place where they invest their money. So for example, at the moment, many wealthy UBS clients keep their investments with UBS, but they do their everyday banking with rivals like JP Morgan, Bank of America, or other US banks. And so that gives those competitors regular contact with those clients and more opportunities to win the rest of their business. So what UBS is hoping is that if it's managing both their investment and their day-to-day banking, those clients are going to be less likely to leave and UBS becomes much more profitable.

3:19So, you know, I mentioned this little spat that's going on between UBS and the Swiss government. How does this venture into the US play into that whole thing? Sure. So UBS believes America is one of, if not the biggest opportunity for its future growth. The Swiss government wants the bank to hold a lot more capital against its overseas subsidiaries after the collapse of Credit Suisse. The Swiss government argues these rules are needed because overseas operations have repeatedly caused problems for Swiss banks in the past. So this is why they want UBS to hold roughly more than$20 billion more capital against overseas subsidiaries.

3:56And the U.S. accounts for the biggest share. And of course, UBS says the extra capital could make it more expensive to grow in the very market it sees as its future. So it's at an impasse. This is now in the hands of Swiss Parliament at the moment. There's not much anyone can do except watch that play out in Parliament later this year. In the meantime, UBS is borging ahead with its U.S. plans. So Mercedes, I apologize if I may be looking a little bit too much into this. Maybe I'm extrapolating a little bit too much. But there was speculation that UBS may leave Switzerland for the U.S. as part of this capital requirements spat.

4:32Is that what this is, this move into everyday banking for wealthy Americans? I think strategically, this is another step in UBS's transformation from predominantly kind of Swiss bank into a global wealth manager competing head on with Wall Street. What I think is fair to say is that the Credit Suisse Rescue transformed UBS's wealth management business in Europe and the Middle East and Asia, but it actually didn't do much for its U.S. ambition. So when Sergio Amati, the CEO, unveiled the post-Credit Suisse strategy in early 2024, addressing that U.S. wealth business became quite a central objective.

5:10But this was always part of the plan, regardless of what the Swiss government is forcing UBS to do. They always wanted to grow in the U.S. Mercedes Ruhle is the FT's Switzerland and Austria correspondent. Thanks so much, Mercedes. Thank you.

5:29The global AI race is driving record levels of mergers and acquisitions. Companies made nearly $3 trillion in deals from January to June this year. That's up almost 50 % from the same period as last year. Most transactions took place in the tech sector, followed by energy, which we talked about a little earlier this week, and industrials. Deals this year have been higher in value, but there have been fewer of them. The biggest deals came from companies that are racing to build data centers and expand their AI capabilities, and so far, most investors have shrugged off market volatility in order to have a stake in the game.

6:12Ukraine's drone strikes on Russia have become hard to ignore, so hard that even Russian President Vladimir Putin admits they're, quote, causing problems. The attacks have led to fuel shortages, and there have also been civilian casualties. Many Russians are getting angrier at a war that is now playing out in their territory. While Putin is now acknowledging the disruptions, he's also rejected any suggestion of pausing the strikes through a limited ceasefire. Max Seddon covers Russia for the FT. He joins me now to talk about the growing tensions. Hi, Max. Hey, how you doing? I'm doing all right.

6:44So let's start with these drone strikes. When did they start causing problems, in Putin's words? So Ukraine has been trying to develop its own homegrown drone capabilities really since the war started in 2022. But when you've really started to see them be as effective as they have been is in the last two months when Ukraine not only has gotten better developing the drones, they switch what they've been targeting. So before that can mark April, there were more strikes on oil export facilities. Now you are seeing them redirect their efforts to refineries. And this has been really successful in making ordinary Russians across the country feel the effects of the war, because by varying estimates, a quarter or a third of Russia's refining capacity is offline in more than a third of Russia's regions.

7:39There are various forms of fuel rationing now. So this is a situation where Ukraine has really been able to bring the fight to Russia well beyond the front line more than they have at any point during the war. So Putin recently said that Ukraine had offered a truce on the long-range strikes. Ukraine hasn't confirmed it, but either way, Putin said he wouldn't go for it. Why not? So the biggest sign that this has become too much of a problem for Putin to ignore is the fact that on Sunday, he made a big effort to be seen addressing it. He talked about it at the United Russia Party Congress, the main Kremlin party.

8:17he held a meeting with top officials on how to solve the fuel shortages problem. And he gave this very strange interview to state television. And that's significant because before that, the Kremlin had been doing what it usually does, which is try to disassociate Putin from any bad news that's happening at all. And Putin, when he was doing this, he was clearly trying to reassure Russians. But you could also see that his real priorities, winning the war on his own terms, as maximalist as they ever have been, was what was shining through. And he said that Ukraine had made some offer through some back channels to do a mutual suspension of long-range strikes.

8:54And he immediately rejected that out of hand because he said that would just help Ukraine's government, led by President Volodymyr Zelensky, stay in power. So, Max, how are Russians responding to what's going on right now? So this is really the first time that ordinary Russians have had to feel the impact of the war at anything like this scale. There are a lot of lines at gas stations and there's rationing. They're out of various different kinds of fuels and also the widespread Internet blackouts. This is something that's been imposed by security services. That's never really been adequately explained, but it's partly to keep a lead on descent.

9:35It's partly to deal with the Ukrainian drones. It's partly because of worries that they have about vulnerabilities in Russian defenses to potential other things that Ukraine could do. And so this is the first time that the Kremlin has not been able to convince ordinary Russians that the war isn't affecting their lives. You are still unlikely to see that really crystallize into some sort of popular uprising. There's no real opposition figure that people can rally around. And so instead, what you're going to see is uncertainty and this kind of general malaise across the population. Max Seddon is the FT's Moscow bureau chief.

10:15Thanks, Max.

10:22Before we go, I wanted to flag this week's episode of the FT's Rockman Review podcast. Our chief foreign affairs commentator Gideon Rockman sat down with the FT's editor Rula Halaf to discuss the trilateral peace deal signed last week between Lebanon, Israel, and the United States. This agreement is problematic on two fronts. First of all, it's not really possible to implement it because what the agreement says is that Israel will now withdraw from southern Lebanon if Hezbollah is disarmed or when Hezbollah is disarmed. The reality of Lebanon today is that the government will not be able to disarm Hezbollah.

10:59That's just the reality of Lebanon. You can hear the entire episode of the Rockman Review by clicking the link in our show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.

11:50Thank you. When conditions change, alternatives matter. Listen to Strategic Alternatives, available wherever you get your podcasts.