UBS plans to double invested assets of Asian clients over five years

The Swiss financial services firm is shedding 10,000 staff but hopes to double the value of invested assets of Asian clients in the next five years

PUBLISHED : Monday, 14 October, 2013, 12:00am
UPDATED : Monday, 14 October, 2013, 4:31am

UBS, Switzerland's biggest bank, plans to double invested assets of clients in Asia over the next five years even as it cuts 10,000 jobs and restructures its investment banking business globally, says chief executive Sergio Ermotti.

Restructuring would not hurt the bank's expansion plans in Asia, Ermotti told the South China Morning Post during a visit to Hong Kong, because economic growth in the region would outpace that of the United States and Europe.

"The reforms are aimed primarily at improving cost efficiency and productivity and in the long term will boost profits," he said. "We expect to see growth in every region of our business but expect it to be fastest in the Asia-Pacific region, particularly in China, Japan and Southeast Asia."

UBS aims to increase its assets under management in Asia to 25 to 30 per cent of its global assets under management from 14.3 per cent now.

If that happens, the Asia-Pacific region will replace Europe, which contributes 20.9 per cent of the group's total invested assets, as the group's second-largest market.

The US is the company's largest market and contributes 43.4 per cent of total invested assets.

Last year, UBS said it would wind down its fixed-income and other non-core businesses and reduce staff by 10,000 to 54,000 by 2015.

The restructuring marks one of the biggest retrenchment exercises in the financial sector since the collapse of Lehman Brothers at the peak of the financial crisis in September 2008.

Ermotti, who took the top job at UBS in 2011, said he would sharpen the group's concentration on wealth management in growth markets.

He added that he believed Asian markets would post stronger economic growth and generate more wealth than either the US or Europe.

According to the BCG Global Wealth Report 2013 - the Boston Consulting Group's 13th annual report on the global wealth-management industry - the Asia-Pacific region accounts for one-third of overall global wealth.

The wealth of high net worth individuals - defined as those with liquid assets of more than US$1 million - in Asia excluding Japan grew 13.8 per cent last year and is expected to increase 11.4 per cent per year from now until 2017.

The total wealth of such individuals in Asia reached US$12 trillion by the end of last year, compared with US$12.7 trillion in North America, according to the World Wealth Report published by Capgemini and RBC Wealth Management last month.

The report expects the wealth of the high net worth individuals in the Asia-Pacific to grow 9.8 per cent annually to reach US$15.9 trillion by 2015, surpassing North America's expected US$15 trillion.

Ermotti said government regulatory reforms would present a challenge to managers seeking to provide services for the region's wealthy, including raised banking capital requirements and curbs on executive pay.

While regulation of the financial sector was important, he said, many post-global financial crisis reforms tended to focus too much on tightening curbs on financial institutions and did not sufficiently address structural economic issues.

UBS had coped with increased capital requirements well, he said, and at the end of June had fully complied with the Basel III common equity tier-1 ratio of 11.2 per cent. It aimed to increase the ratio to 13 per cent by next year.

Ermotti said UBS was the first major global bank to reach the 2019 Swiss common equity tier-1 ratio of 10 per cent and achieved it six years ahead of target.

"Every quarter since we set the strategy in 2011, we have executed in a clear and disciplined way building an unmatched capital position," he said.

"It is easy for the financial sector to become a scapegoat and be blamed as the sole or primary source of the financial crisis. Of course, the financial sector has to take responsibility.

"But suggesting that it should shoulder the entire consequences of the financial crisis runs the risk of failing to address the real issues of how to make the global economy work better."