UBS Sees Europe Wealth Hub Shrinking Assets, Costsby
Bank plans to shift European wealth operations to single unit
Move will lower risk-weighted assets by $2.6 billion
UBS Group AG is set to reduce capital needs by shifting its European wealth-management operations to a single unit which will probably be based in Germany, according to Juerg Zeltner, who oversees the business.
Risk-weighted assets at the Swiss bank’s entity will drop by as much as 2.5 billion Swiss francs ($2.6 billion) after merging its separate European operations into branches of a single unit, according to the executive. Using unified information-technology systems across the continent will help lower costs in the shift due to be completed by the end of the year. The bank will continue to streamline its operations once the move is complete.
UBS is seeking ways to lower costs and raise capital buffers as regulators toughen scrutiny of risky assets to avoid a repeat of the global financial crisis that forced the Swiss bank into a bailout. European lenders based outside the European Union using London as a hub to service the region’s clients are also looking for ways to maintain so-called passporting rights by shifting operations to cities including Frankfurt and Paris after the U.K. decided to leave the trade bloc.
“I can’t afford to run five, six full banks in Europe any more,” Zeltner said. “Ultimately, we want one infrastructure in all locations.”
At the end of June, UBS had 30.3 billion francs in common equity Tier 1 capital, a measure of financial strength used by regulators, according to latest filings.
UBS, the world’s biggest manager of money for the rich, imposed a partial hiring freeze at its wealth-management business to cut costs, people familiar with the matter said in July. The bank has also been eliminating jobs at the unit, which reported a 31 percent drop in pretax profit in the second quarter as net new money inflows slowed.
UBS already employs about 570 people in Frankfurt, which is also home to Deutsche Bank AG and Commerzbank AG. The Zurich-based bank has restructured its IT platform in Germany to streamline services across the region.
Switzerland isn’t part of the EU, forcing lenders to service clients through hubs within the region. Credit Suisse Group AG operates a wealth management unit in Luxembourg, while Julius Baer Group Ltd also has a subsidiary in Frankfurt.