UBS: bank seeks rich pickings amid intensifying competition

The ranks of the rich shrank last year. That does not necessarily mean that wealth managers such as UBS have less in their coffers.

A mood of caution persists among clients, according to its boss Sergio Ermotti. But the Swiss bank still struck an upbeat tone on Tuesday. Shares rose as much as 4 per cent, as it reported a stronger than expected inflow into its wealth management arm in the third quarter.

UBS’s $3.3bn takeover of Credit Suisse in March might have been a cue for mass departures of disgruntled clients. But the wealth unit reported $22bn of net inflows, with the Credit Suisse Wealth Management business notching up its first quarterly net inflows since the beginning of 2022.

Yes, clients left. But the bank has lured some of them back, while winning new customers and more business from existing ones. The departure of 500 relationship managers has so far resulted in a loss of just $20bn of assets under management, a half per cent of total.

Securing client loyalty does not come cheap. Their cash is being funnelled into higher-yielding products faster than before. That has reduced the wealth management arm’s net interest income by 3 per cent over the quarter.

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Even given its scale, rivals circle. Citigroup has made growing its wealth business a strategic priority. Morgan Stanley, already the largest wealth manager, is pushing deeper into the market. Outgoing chief executive James Gorman has promised to triple its assets under management to $20tn.

UBS’s invested global wealth assets of $3.6tn puts it well behind its more highly valued rival Morgan Stanley. Buying Credit Suisse will add billions of dollars in equity. But since then the UBS price-to-book value at 0.9 is closing the gap with the 1.4 times of Morgan Stanley. UBS’s share price has performed very well over six months, up 28 per cent. Its rival’s has declined.

Scale has advantages. UBS should achieve greater operating efficiency and pricing power as a result of bulking up. Better to capture more of the 53 per cent rise of clients in the $50mn-plus club since 2017. These quarterly results suggest that it will succeed.

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