UBS wealth merger creates £172bn powerhouse

Jeannie Matthews
January 22, 2018

In announcing the merger of its wealth management businesses, UBS said it would maintain what it called "regional variations in the client service model" on offer, an apparent reference to the significant differences that exist between American and non-American clients as a result of the way the USA taxes its citizens, which results in their requiring products and advice designed for specifically for them.

Further, for 2017, the company said its Board of Directors intends to propose a dividend to UBS Group AG shareholders of 0.653 francs per share, an 8% increase on the prior year.

"In the last few years, we transformed our wealth management businesses, adapting to a new paradigm while adding CHF1.0bn in adjusted profits since 2011", UBS group chief executive Sergio P Ermotti said in a statement accompanying the results today. Martin Blessing, president of Wealth Management, and Tom Naratil, president of UBS Americas and Wealth Management Americas, will serve as co-presidents of the newly formed unit.

"The word buyback will probably excite a number of people but it is a small buyback", Neil Smith, an analyst at Bankhaus Lampe, said by telephone. He also said the merger will allow the bank to more effectively leverage the purchasing power of the $2.3 trillion in client assets it manages. Banks including Citigroup, Deutsche Bank and Credit Suisse also all disclosed one-time charges.

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UBS posted a 2.2 billion franc net loss for the fourth quarter of 2017, hit by a 2.9 billion franc writedown due to USA tax reforms. The bank now has more certainty on regulatory requirements and legacy legal issues after European regulators in December decided on global capital standards.

The reshuffle follows the surprise departure in December of the global business's 50-year-old head Juerg Zeltner, though Ermotti said that had "zero to do" with the changes. The lender has a CET1 ratio - a key metric of financial strength - of 13.8 percent and said it intends to operate with that at 13 percent. The unit had $1,395 million in profit before tax for the year - a 12% rise year over year, according to the report. As an alternative, it is committed to raise the dividend by mid to high single digit percent a year. It held its last strategy update in 2014.

Singapore's sovereign-wealth fund GIC ceased being the biggest shareholder in UBS in May after cutting its ownership by nearly half, saying it was "disappointed" that it lost money during the near-decade it was invested in the Swiss bank.

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