UBS growth plans on track after mega-merger

UBS Group CEO Sergio Ermotti is overseeing one of the most stable lenders in Europe seven years after a major revamp.
UBS Group CEO Sergio Ermotti is overseeing one of the most stable lenders in Europe seven years after a major revamp.PHOTO: AGENCE FRANCE-PRESSE

ZURICH • UBS Group's newly combined US$2 trillion (S$2.7 trillion) wealth management business and investment bank are helping chief executive officer Sergio Ermotti deliver on growth plans.

The wealth management business - which counts many of the world's billionaires among its clients - posted profit, excluding litigation charges, slightly ahead of estimates and brought down costs within its target range.

Mr Andrea Orcel's investment bank also delivered a stellar performance for a second straight quarter as revenue from equities trading surged.

Mr Ermotti is overseeing one of the most stable lenders in Europe seven years after a sweeping revamp of the bank that reduced risk and tilted the lender towards wealth management.

While that is producing steady profits, the bank is buying back stock and rejigged financial targets this year after investors argued that the CEO should do more to boost the stock price.

Profit at global wealth management rose to 1.04 billion francs (S$1.4 billion), compared with 879 million francs a year ago.

That helped compensate for one of the biggest surprises in the newly combined business - about 9 billion franc outflows linked to tax-related withdrawals in the US and a corporate employee share programme, contributing to net outflows.

That compares with the 19 billion francs of net assets UBS added in the first quarter.

Revenue from equities, foreign exchange and credit trading helped fuel gains at the investment bank as UBS benefited from similar trends to US rivals.

The investment bank posted pre-tax profit of 569 million francs, the Zurich-based bank said in a statement, beating the 397 million francs average estimate in a company-compiled survey.

Mr Ermotti changed the bank's targets earlier this year, committing to buy back as much as 2 billion francs of stock over three years, and targeting 2 per cent to 4 per cent growth in net new money for global wealth management and a cost-to-income ratio of under 75 per cent for the group.

That left many investors and analysts cold, arguing that the new targets were too conservative and that the bank had more room for repurchases.

In a Bloomberg Television interview yesterday, Mr Ermotti said UBS expects to achieve the target for net new money this year.

To benefit from the same synergies as United States rivals - with pooled infrastructure and clientele - Mr Ermotti in January tasked Mr Tom Naratil, head of the US wealth business, and Mr Martin Blessing, the former CEO of Commerzbank, with the merger of the divisions, now known as global wealth management.

UBS scaled back its investment bank after the financial crisis. The lender has cut the amount of capital allocated to the investment bank, focusing on areas such as equities, foreign exchange and advisory services.

Moody's boosted its credit rating for UBS' main unit last month, which said the restructured investment bank and wealth management business should help the lender weather a market downturn.

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A version of this article appeared in the print edition of The Straits Times on July 25, 2018, with the headline 'UBS growth plans on track after mega-merger'. Print Edition | Subscribe