UBS considering asset management overhaul to cut costs, sources say

UBS considering asset management overhaul to cut costs, sources say
UBS considering asset management overhaul to cut costs, sources say

UBS plans to cut hundreds of millions of dollars in costs at its asset management division as the bank explores options for a business whose profits are under pressure, people with knowledge of the discussions told Reuters.

The initial goal of the study will be to reduce costs, these people said. One said the Swiss bank intended to cut costs in that business by at least $300 million, including by reducing Swiss-based back-office staff who joined Credit Switzerland, the people said.

The bank is also exploring the possibility of absorbing parts of the unit into its broader wealth management business, the people added.

A UBS representative declined to comment.

UBS has been part of Credit Suisse since taking over the bank last year in a state-funded rescue.

Asset management firms, which invest clients’ money in a range of products, increasingly need scale to compete and maintain profitability.

UBS’s asset management division contributed less than 7% to the bank’s total revenue in 2023 and is dwarfed by the bank’s wealth management division, which accounts for more than half the figure total business of the group.

Following the Credit Suisse acquisition, assets invested in asset management increased to approximately $1.6 trillion, up from $1.1 trillion in 2022, according to UBS’s annual report.

But the business saw net outflows of $12 billion in the fourth quarter, slowing its fundraising for 2023 to half of the previous year, according to its annual accounts.

The asset management unit’s underlying pre-tax operating profit decreased 5% in 2023 from the previous year as operating expenses increased 35% to 2.1 billion dollars over the last year.

Underlying figures exclude costs related to the integration of Credit Suisse.

The review comes after the bank named Aleksandar Ivanovic, a UBS veteran, to oversee asset management in late January, replacing Suni Harford, who left the firm after leading it for about five years.

The bank said on February 6 that UBS was “not immune to the structural issues facing the asset management industry” and that it aimed to achieve a cost-to-income ratio, a measure of costs as a proportion of revenue, below 70% by the end of 2026. This ratio was 80.2% at the end of 2023, according to the bank’s financial statements.

UBS said achieving cost advantages was a “critical part” of its plan and that it aimed to grow the business “while building on our strong partnership with global wealth management”.

UBS also said wealth management and asset management should work closely together, particularly for separately managed accounts, which are large individual accounts customized for clients.

Some UBS bankers believe that bundling parts of asset management into wealth management could improve synergies, given that they often target similar clients, some of the people said.

Wealth management is aimed at ultra-wealthy clients who often have long-standing relationships with their bank. At UBS, the unit is headed by Iqbal Khan, a former Credit Suisse banker. (Reporting by Stefania Spezzati and Oliver Hirt; Writing by Elisa Martinuzzi and Jane Merriman)

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