UBS Overhauls European Wealth Business, Revamps Management

  • Swiss bank combines cross-border with domestic operations
  • Germany CEO to oversee Swiss teams serving German clients

UBS Group AG is consolidating its wealth management business in Europe and emerging markets to streamline operations, expanding the role of top executives in much of the region.

Cross-border operations will be combined with domestic businesses in a set-up that will reduce the number of offshore booking centers from about 10 to three -- Switzerland, Germany, and the U.K., the bank said in a memo to employees on Monday. European onshore businesses will be integrated in the bank’s new continental hub in Frankfurt, according to the memo, seen by Bloomberg and confirmed by the bank.

Wealth managers are under pressure from record-low interest rates and reticence among clients to put their cash to work in investments because of market uncertainty. In eliminating two separating reporting lines -- for domestic and cross-border operations -- UBS is seeking to spur activity by giving clients more opportunities to invest beyond their home countries.

“In the end, this will reduce the costs and improve the value of services to clients and ultimately boost revenues,” said Tomasz Grzelak, an analyst with Baader Helvea who has a buy recommendation on the stock.

The reorganization also may help UBS to manage risks at a time when regulators and tax authorities are pressing banks for more transparency in operations and on client assets. UBS is creating a new role of head of business risk and regulatory management for Europe and the emerging markets, which doesn’t include the Asia-Pacific region.

“Converging client needs and regulatory trends across EEM represent a unique opportunity to better align ourselves to serve our clients,” Paul Raphael, head of wealth management for the region, said in the memo. “The ‘One Market’ approach will allow the whole wealth management organization to improve the strategy for the respective markets.”

Raphael oversees a region accounting for about 24 percent of client assets managed by UBS, or about 523 billion francs ($544 billion), at the end of March. Europe lagged most other regions in terms of net margin in the first quarter, while emerging markets was the most profitable.

Daniel Regli, an analyst at MainFirst with an outperform rating on the stock, said the new structure makes sense and may be an opportunity to cut some costs without compromising on revenue. It coincides with a Swiss agreement to turn over information on foreign bank accounts to tax authorities in other countries.

“Since countries need to exchange tax data anyway, it doesn’t really matter where the assets are booked," Regli said. “‘Combining these operations eliminates double functions which manage the same client segment.”

UBS ranked among the top performers Monday in the Bloomberg 500 Banks index. The stock rose in Zurich trading to close 3.4 percent higher at 16.79 francs, the most in about two months.

Bigger Roles

Among managers taking on bigger roles, Thomas Rodermann, head of the German business, will now also oversee teams serving German residents from Switzerland as well as operations in Luxembourg, Austria and the Nordic countries.

Fabio Innocenzi, who heads up Italy and Spain, will now be responsible for onshore and offshore businesses in both markets. In the U.K., Jamie Broderick will become responsible for both onshore and offshore businesses and will be in charge of setting up a desk in Switzerland to better serve U.K. clients across booking centers.

As Broderick is retiring at the end of the year, Eva Lindholm will take over as head of the U.K. wealth management business in October, the memo says.

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