Zurich When a name was given to his UBS, Ralph Hamers reacted indignantly: “We don’t see ourselves as a European bank,” the head of the major Swiss bank recently clarified in front of analysts. Rather, UBS is a global bank with three home markets: Switzerland, Asia and the USA. Hamers is now launching a new offensive in the latter market. The aim is to reduce the gap to the large US banks such as Morgan Stanley, which are still rated significantly higher on the stock exchange than the Swiss institute.
A new US boss should help: UBS signed Naureen Hassan from the New York branch of the Federal Reserve as of October. Your predecessor, Tom Naratil, has to leave the bank after 39 years, as the bank recently announced. At the same time, UBS is strengthening the role of star banker Iqbal Khan. He becomes the sole head of wealth management (Global Wealth Management) – by far the most important division of UBS.
Hamers said, “Our global wealth management business and our Americas region are strategically important and both offer us significant growth opportunities.” He is confident that Hassan and Khan can build on Naratil’s successes and advance the bank’s strategic ambitions.
Hassan’s signing aligns with a series of strategic appointments and acquisitions designed to further strengthen UBS’s profile across the Atlantic. The largest Swiss bank, for example, elected Colm Kelleher as chief supervisor at the general meeting in April – a banker who has spent most of his professional life at Morgan Stanley.
Top jobs of the day
Find the best jobs now and
be notified by email.
CFO Sarah Youngwood, who has been in office since May, poached UBS from JP Morgan. And with the acquisition of digital wealth manager Wealthfront, which is expected to close in the second half of the year, UBS is making a multi-billion dollar bet on affluent digital clients in the United States.
Important but not very profitable market
From Hamers’ point of view, the Americanization of UBS is a logical step: With its focus on wealthy customers, the bank sees the greatest potential for growth there. According to Hamers, the USA still has the most rich people. In addition, the economy and wealth are growing faster there than in Europe. “It is very important for us to grow in the USA,” Hamers recently emphasized.
The US business is already making by far the largest contribution to operating income. It was $3.8 billion in the first quarter, up 22 percent year-on-year. But in no other market are dollars earned as hard as in US wealth management: UBS had to spend 84 cents in the US for every dollar of income in the first quarter. For comparison: In Switzerland, the ratio of costs to income in wealth management is 51 percent.
The reason for the high costs in US wealth management is the commission-based business model with independent client advisors that is common in the USA. This is exactly where Hamers wants to start: He wants to persuade the human advisors who call their customers and provide them with investment tips to give priority to rich and very rich customers. The type of customer care that is common in the USA is very expensive. “This is only economically viable from a certain minimum level of assets.”
At the same time, UBS wants to grow in the segment of wealthy customers with assets of up to two million dollars. Hamers calculates that this customer group in the USA has assets of 16 trillion dollars. At the same time, however, it is not worthwhile to provide personal-intensive individual support.
>>> Read also: Foreign banks are courting Germany’s multi-millionaires
As a result, UBS acquired the purely digital wealth manager Wealthfront for $1.4 billion earlier this year. According to UBS, the platform offers access to financial planning, banking services and investment solutions, making it easy to manage assets. The Wealthfront solution is intended to become a basic offering for wealthy customers. For larger decisions or investments, these customers should also be able to speak to an advisor.
Tax benefits expire
The dovetailing of the Wealthfront acquisition with the existing analogue customer service offering will be one of the most important tasks of the new US boss Hassan in the future. She has experience with this: Before her time at the Federal Reserve, Hassan was digital head of Morgan Stanley Wealth Management.
The strong focus on the USA already gives UBS a financial advantage over the competition. Industry experts estimate that UBS can hope for additional income from higher interest rates in the USA of 1.5 billion dollars this year alone. Credit Suisse, after all the number two in Switzerland, has long since sold its bulk business in the USA – and according to estimates is only benefiting from the US interest rate hike with additional income of 150 million dollars.
Magdalena Stoklosa, banking analyst at Morgan Stanley, also sees strong US growth as an important reason to recommend the share as a buy. It also certifies that UBS is a “flagship” for the modern, digitally supported wealth management business.
>>> Read also: Swiss court finds Credit Suisse guilty in money laundering case
However, the growth and profitability offensive in the USA is not just for stock market valuation – it also has tax reasons. Because to this day, UBS – like many other banks – is benefiting from generous write-down opportunities. You can have the losses that accumulated during the financial crisis in 2008 tax credits.
Therefore, the bank pays no income tax in the US – which makes the US business even more attractive financially. The tax benefit expires in 2028. However, Hamers should not take that long in his fight against the costs in the USA.
More: Special tax for Spain’s banks – stock prices across Europe react significantly