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22 October 2019
WEALTH MANAGEMENT

UBS pulls in $16 billion from rich clients as assets hit record

The lender’s Chief Executive Officer is seeking to turn the corner after a year marred by huge legal fines, questions about succession planning and a deepening slump in the share price.

UBS/BLOOMBERG


UBS Group’s wealthy clients added $15.7 billion in new money last quarter, giving a boost to star hire Iqbal Khan as he seeks to reinvigorate the key wealth management unit, reported Bloomberg.

UBS Group stated that the inflows lifted assets overseen for the affluent to a record of $2.5 trillion.

The asset management unit won $24.1 billion in long-term net inflows. While profit beat analysts’ estimates, UBS said it will book a roughly $100 million charge in the fourth quarter to restructure its investment bank and warned that lower interest rates will hurt income from lending compared with last year.

In August 2019, the CEO shook up the management board, hiring former Credit Suisse Group banker Khan to co-run the wealth management unit and positioning him as a potential successor.

UBS was one the first banks to pivot away from investment banking and toward wealth management after the financial crisis, becoming a model for rivals including Credit Suisse. But increasing competition for rich clients, negative interest rates and a slowing economy are putting pressure on that business. In August 2019, UBS said that it would expand a policy of charging affluent clients for excess cash holdings.

Shares of the lender have lost 6.5 per cent this year, compared with a gain of 15 per cent at Credit Suisse, where a three-year restructuring modelled on UBS’s pivot to private banking is beginning to bear fruit. To lift the stock, UBS has earmarked $2 billion for share buybacks through 2020 and the bank is nearing its $1 billion target in buybacks this year.

Global wealth management is by far the biggest of UBS’s units, contributing more than twice as much revenue and pre-tax profit last year as the investment bank. UBS said that the pre-tax profit at the unit declined about two per cent, as fee income and income from lending fell.

In a memo to employees, Khan pointed to unrealized potential within the wealth management business. Key will be his take on developing UBS’s offering to wealthy clients in Asia, a region that wasn’t under his control at Credit Suisse and which produces millionaires at a faster pace than other regions.

Sergio Ermotti, UBS’s Chief Executive Officer is also making changes to the investment bank, reshuffling senior management and combining trading operations in changes that may ultimately eliminate hundreds of positions. The bank is cutting about 40 jobs in the Asia-Pacific region as part of the shake-up.

The restructuring comes as UBS seeks to boost collaboration between dealmakers and its wealth-management unit while sharpening a focus on industries most of the interest to its richest clients.


RELATED STORIES: ASSET MANAGEMENT UNIT WEALTH MANAGEMENT UNIT IQBAL KHAN UBS GROUP CREDIT SUISSE GROUP


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