UBS to revamp wealth management business to cut costs
UBS is planning to merge large parts of the back and middle-office functions in its wealth management business, in a move that will save the Swiss group several hundred million francs a year and will result in hundreds of job cuts in its initial stage.
Three people familiar with the plans told the Financial Times that an announcement on the restructuring of the world’s biggest wealth manager was likely to be made next Tuesday, when UBS releases its first-quarter results.
The bank may also use the results announcement to tell investors about a new approach to cost cutting across the group which is designed to end the “dysfunctional” status quo of business divisions and the company’s corporate centre battling each other on savings.
Wealth management, the mainstay of UBS since its 2012 restructuring, has been a choppy business of late, with the bank reporting a sharp fall in profits in the three months to December as market volatility and fears for global growth tamed the risk appetites of the rich.
The people close to the plans insisted that the planned changes at wealth management were about seizing a strategic opportunity, and not about responding to weakness in the division’s performance. UBS declined to comment.
Under the initial restructuring, UBS’s wealth management unit will move to common IT systems and shared support functions across the more than 50 countries it operates in. That will eliminate several hundred jobs in the back and middle office, two of the people said. The cost savings will be several hundred million francs a year, on top of UBS’s existing cost-control programmes.
In the longer term, UBS is hoping to merge some back and middle-office functions between its main wealth management division and Wealth Management Americas, building on the success of a shared Chief Investment Office. The two divisions, which have historically been siloed, may also combine their buying power to negotiate with third parties. They will remain separate commercial entities.
“We are transitioning from federations to a global wealth management . . . with one wealth management platform,” one person familiar with the strategy said, describing the move as a natural next step for UBS. The American business is the bigger of the two, with invested assets of SFr1.035tn ($1.070tn) at the end of last year versus the international division’s SFr947bn.
Wealth management is the scene of the most notable restructuring, but other parts of UBS are tightening their belts as well. The investment bank is laying off more staff than usual in its annual cull, in response to tough market conditions, a person familiar with the situation said.
The bank’s management has agreed a new “front to back” approach to costs across the group that will place more onus for cost savings on business divisions and less on the group corporate centre, a person familiar with those plans said.
“We want to go from the dysfunctional situation of ‘us versus them’, to ‘we are all in this together’,” the person said. The approach involves forging teams of front-office bankers, operations and finance staff who are charged with looking at costs from the moment the bank begins a process, to the moment it ends. UBS hopes that the “cleaner process” will identify savings that were previously obtuse.
The Swiss bank has a good reputation for cost-cutting among its European peers, with former CFO and now Deutsche Bank boss John Cryan credited with getting the lender’s cost base into shape in the aftermath of the financial crisis. It appointed a new CFO, Kirt Gardner, last year after Tom Naratil moved on to head the US wealth management business.