The Swiss bank and world’s largest wealth manager will issue results in dollars from the fourth quarter of this year. This publication asked the bank about the move.
Wealth industry practitioners might not have spotted the detail when UBS issued its solid-looking third-quarter results a few days ago, but one fact highlighting how global this firm now is comes from its decision to switch its reference currency to dollars. (No longer will the editorial team here have to convert from the Swiss franc.)
The new approach starts in the final three months of this year, the Zurich-listed firm has said. This approach is already used by major Swiss and other European firms such as Novartis, Swiss Re and AstraZeneca. HSBC, the London/Hong-listed bank with a global footprint, reports in the dollar.
With the US market accounting for a large chunk of business, the cost of reporting in the currency where the firm might happen to be based and listed can be high. The perils of reporting in Swiss francs for a large, international business with multiple countries’ revenue streams came into sharp relief when the Swiss franc skyrocketed against the euro and dollar in early 2015. The franc had been capped at 1.20 against the euro by the Swiss National Bank, but the central bank suddenly ended the cap. The high appreciation of the franc hit Switzerland-based firms’ results. (As far as this news service understands, that episode did not cause UBS’ present decision.)
Various shifts in how UBS’ legal structure changed over the years, affected how balance sheets and income statements are composed. In sum, using the dollar as the base reporting currency takes out unnecessary complexity.
Kirt Gardner, UBS’ group chief financial officer, explained the reasoning as follows in the bank’s recent results presentation: “Beginning the 1st of October, the US dollar has become our functional currency and will also be our presentation currency for the fourth quarter. From 2019, net interest income should increase by around $250 million compared with full-year 2018. For the fourth quarter, we expect a limited net benefit as we incurred costs to reposition our balance sheet that offset any net interest income benefit. Our historic financials will be restated with no material changes expected.”
This news service contacted UBS’ largest local rival, Credit Suisse, and next-largest Swiss house, Julius Baer, to see if they are considering a similar move. Credit Suisse was due at the time of going to press to issue its Q3 results but had not responded to queries as of the time of this article going to press. As for Julius Baer it told this publication that its situation contrasts with that of UBS.
“For Julius Baer things are different to the extent that the dollar represents just 6 per cent of our costs and that we have no US operations at all,” a spokesperson said.
“In the case of UBS’s wealth management business their Americas business represents more than half of assets under management and two thirds of their global base of relationship managers,” the spokesperson added.
UBS, which has pulled all its regional wealth management units, including its Americas business, under one organisational roof, has been mulling this option for a while. The bank does not expect to shift any of its capital ratios or other major ways of measuring performance.
What the move also suggests is that while there is sometimes talk of challenges to the status of the dollar as the world’s leading reserve currency, as far as some major banks and corporations are concerned, the dollar is their reporting unit of choice.