Strategy

UBS charts 2002 course as CSPB meanders

A staff reporter, 18 January 2002

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Following their customary strategy of announcing major operational changes during the festive season, Credit Suisse and UBS begin 2002 with ...

Following their customary strategy of announcing major operational changes during the festive season, Credit Suisse and UBS begin 2002 with marked strategic differences. Under analysis it appears that UBS has crystallised its focus appropriately to address its premier position in the global market. Conversely, CS appears, alarmingly, to be running the risk of setting aside all the successes of outgoing ceo Oswald Grubel in an effort to streamline a bi-polar group set-up. The question remains whether either house has the right strategy for the private banking market.

At close of play 2001, amid a flurry of commentary over Luqman Arnold’s departure as president of the group executive board, the bank transferred UBS Warburg Private Clients into UBS Painewebber. Additionally, UBS established a wealth management board chaired by Joseph Grano, now also head of UBS Painewebber.

Also serving on the high-powered board are Georges Gagnebin, ceo of UBS Private Banking, Stephan Haeringer, ceo of UBS Switzerland, John Fraser, the new ceo of UBS Asset Management, and Mark Sutton, president of the US private client group.

The aim of this strategic Uber group is to coordinate synergies between UBS Private Banking and UBS Painewebber to create an integrated global wealth management platform. This is in line with the bank’s stated aims since the merger in 2000 to replicate the structured Painewebber business model within its own universal private banking brand. Grano and Gagnebin will have a task to identify the means by which an American style of business can tie into the Swiss private banking approach.

While UBS articulated a well-structured plan for 2002, Credit Suisse Group has, for the first time in many years, failed to provide a focused strategic response. The year-end analyst corporate presentation revealed little coherence for the private banking group. Indeed, with its ‘new’ strategy, CS runs a significant risk of losing much of the ground it has gained against its Swiss rival UBS. Crucially, its highly credible net profitability levels projections were downgraded in this new structure.

In 2002, CS Group will operate under two divisions: Credit Suisse Financial Services and Credit Suisse First Boston. The former will house private banking, retail and corporate clients, insurance, life and pensions while the latter assumes investment banking and asset management.

Within CSFS it appears private banking is reconfigured into three units: Switzerland, international and European financial services. As if this were not enough, the private bank is undertaking a disparate range of other initiatives that show little sign of being coordinated under one management team.

Amid all of this it is hard to see precisely where CS resources will be focused in the coming months. Indeed, Credit Suisse’s separation of the Swiss and international businesses would mirror mistakes made by UBS in 2000, when it adopted a similar strategy and lost many key synergies. Moreover, the integration of EFS gives the private bank a distinctly mass affluent mandate.

Operational tactics aside, for a range of reasons outside AUM, both Swiss houses are the touchstone of private banking and close scrutiny of their agendas throughout 2002 is key. However, while both can claim to manage the assets of HNWs from all ranges up to the billionaire – their futures appear now to rest with the volume business of mid-tier wealth management. Indeed, both boast average account sizes below $1m, which firmly places them in the premier market rather than fully-fledged private banking. Are the strategic moves of these two giants diluting the true brand of private banking?

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