Ralph Hamers promotes Americanization

Zurich When his UBS was named, Ralph Hamers reacted indignantly: “We do not see ourselves as a European bank,” the head of a major Swiss bank recently explained to analysts. Rather, UBS is a global bank with three home markets: Switzerland, Asia and the US. Hamers is now launching a new offensive in this latter market. The aim is to reduce the gap to large US banks such as Morgan Stanley, which are still listed much higher on the stock exchange than the Swiss institute.

The new head of the US should help: from October, UBS signed a contract with Naureen Hassan of the New York branch of the Federal Reserve. Your predecessor, Tom Naratil, must leave the bank after 39 years, the bank recently announced. At the same time, UBS strengthens the role of the star banker Iqbal Khan. He becomes the sole head of Global Wealth Management – by far the most important division of UBS.

Hamers said: “Our global wealth management business and the Americas region are strategically important and both offer us significant growth opportunities.” He is convinced that Hassan and Khan can use Naratil’s successes and realize the bank’s strategic ambitions.

Hassan’s signing coincides with a series of strategic nominations and acquisitions aimed at further enhancing UBS’s profile across the Atlantic. For example, the largest Swiss bank at its general meeting in April chose Colm Kelleher as chief supervisor, a banker who spent most of his working life in Morgan Stanley.

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CFO Sarah Youngwood, who has been in office since May, bribed UBS from JP Morgan. And with the acquisition of Wealthfront’s digital wealth manager, which is slated to close in the second half of the year, UBS is placing multi-billion dollar bets on wealthy digital customers in the United States.

An important but not very profitable market

From Hamers’ point of view, the Americanization of UBS is a logical step: By focusing on affluent customers, the bank sees the greatest growth potential there. According to Hamers, the United States still has the richest people. Moreover, the economy and wealth are growing faster there than in Europe. “Development in the US is very important to us,” said Hamers recently.

American business already has by far the largest share of operating revenues. In the first quarter, it was $ 3.8 billion, an increase of 22 percent year-on-year. But in no other market does dollars make as hard money as they do with US wealth management: UBS had to spend 84 cents in the US for every dollar of income in the first quarter. For comparison: in Switzerland, the ratio of costs to income in wealth management is 51%.

The reason for the high cost of wealth management in the US is the commission-based business model with independent client advisers that is common in the US. This is exactly what Hamers wants to start with: he wants to convince human advisers who call their clients and give them investment tips to give preference to rich and very rich clients. The type of customer service common in the US is very expensive. “It is only economically viable with a certain minimum level of assets.”

At the same time, UBS wants to grow in the segment of affluent clients with assets up to two million dollars. Hamers calculates that this group of US customers has assets of $ 16 trillion. At the same time, however, it is not worth providing intensive individual support.

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As a result, UBS acquired the all-digital Wealthfront wealth manager for $ 1.4 billion earlier this year. According to UBS, the platform offers access to financial planning, banking services, and investment solutions, making asset management easier. The Wealthfront solution is to become the primary offer for affluent clients. These clients should also be able to speak to an advisor for major decisions or investments.

Tax credits expire

The combination of the Wealthfront takeover with the existing analogue customer service offer will be one of the most important tasks of the new US boss Hassan in the future. She has experience with this: Prior to her job at the Federal Reserve, Hassan was the digital head of Morgan Stanley Wealth Management.

The strong focus on the US is already giving UBS a financial advantage over the competition. Industry pundits estimate UBS can count on additional $ 1.5 billion in higher US interest rate revenues this year alone. Credit Suisse, finally number two in Switzerland, has long since sold its US wholesale business – and is estimated to only benefit from a US interest rate hike with additional income of $ 150 million.

Magdalena Stoklosa, bank analyst at Morgan Stanley, also sees strong growth in the US as an important reason to recommend the stock as a buy. It also confirms that UBS is the “flagship” of modern, digitally supported wealth management business.

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However, the growth and profitability offensive in the US is not just about stock market valuation – it also has tax considerations. Because to this day, UBS – like many other banks – benefits from generous write-offs. You may have the losses accumulated during the 2008 financial crisis in tax breaks.

Consequently, the bank does not pay US income tax – which makes US business even more financially attractive. The tax credit expires in 2028. However, Hamers shouldn’t have been struggling with US costs that long.

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