Fund Management

UBS: Relentless Building of Wealth Management

Contributing Editor, 9 February 2005

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Those who argue that consolidation in wealth management is happening would no doubt point to UBS to illustrate their argument. The Zurich-ba...

Those who argue that consolidation in wealth management is happening would no doubt point to UBS to illustrate their argument. The Zurich-based bank continues to carve out a private banking empire for itself with acquisitions and organic growth that is the envy of the private banking sector. But is it all a bed of roses for the global titan of wealth management?

Net new money in UBS’s wealth management division rose a staggering SFr67.1 billion ($55 billion) in 2004 (this includes UBS’s private banking operations and Wealth Management USA). That is after a SFr58 billion rise in 2003.

“This is clearly impressive by any standards,” Christoph Ritschard, a senior analyst at Zurcher Kantonal Bank in Switzerland, told Wealthbriefing. “The bank’s onshore business is showing encouraging signs of strong growth and the bank is reaping the rewards of its strategy here.”

The growth of assets under management was stimulated by a very active acquisition strategy during the last few years. Buys included Julius Baer’s business in North America; Sauerborn Trust and Merrill Lynch Private Banking in Germany; and Laing & Cruickshank and Scott Goodman Harris in the UK.

But all of these have been bolt-on acquisitions—none have been major strategic buys. Peter Wuffli, chief executive of UBS, told a press conference in Zurich yesterday that the bank plans to use the private banks it already owns as a platform for further takeovers. More bolts-ons, no doubt, but some feel that Switzerland’s largest bank will take a breather from the acquisition market.

“I think most of the investing spending is over for the time being,” said Mr Ritschard.

What’s more likely, say analysts, is a focus on the existing client base. “Too many of the bank’s clients are buying only one or two products. What UBS wants is to increase its wallet share of its existing client base, so a period of organic growth could be the next step.”

Acquisitions, if they happen, could be directed at UBS’ fast growing business in Asia. The bank has pin pointed growth in China and the rest of Asia and a considerable amount of staff expansion in 2004 happened in the region.

But what about the bank’s high cost overhang with the development of its onshore strategy throughout Europe? Clearly the emphasis in Europe is to grow assets under management, which UBS is doing well.

The bank said that net inflows into its European wealth management initiative totaled SFr13.7 billion, up 27 per cent from 2003. Germany and the UK are still the strongest markets for the bank in this area, but costs in these markets are very high and anecdotal evidence suggest they are still a long way from making profits there.

And when it comes to profits, UBS’ big competitor Credit Suisse announces its results in a little over a week. Profit margins at Credit Suisse’s traditional private banking business still are higher than UBS and now there is talk of revitalizing the bank’s onshore wealth management strategy.

Food for thought for UBS?

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