UBS shareholders have reason to feel aggrieved: the share price is going nowhere and the outlook for the business doesn't signal a soon-to-come dramatic reversal of fortune. CEO Sergio Ermotti needs to do something incisive and finews.asia has designed ten scenarios.
Once again, the outlook for the third-quarter results of Switzerland largest bank aren't boding too well. UBS boss Sergio Ermotti may be under pressure to come up with something substantial to say at the investor day next Thursday, an event it will stage on the same day that the quarterly results are due for publication.
The top executive is shy of showing displeasure with the share price. The finews.asia team has ten suggestions for measures that might stoke some fire and generate a greater sense of expectation for the Swiss-based bank.
1. Major Acquisition – Like Julius Baer?
A pre-emptive strike with a big acquisition: an option which UBS has consistently shunned in recent years. UBS’ conundrum: as the world’s largest private bank, what else could it possibly buy? Local players in hot markets like DBS or OCBC in Singapore would surely whet the Swiss bank’s appetite, if they were available. Or why not Julius Baer, which has reinvented itself from a sleepy private bank into a serious global contender?
The likelihood of a huge step is inextricably linked to the availability and suitability of targets: «It takes two to tango».
2. Less Boredom, More Risk
Whether a riskier bank is more attractive for investors depends on how well it can manage risk-taking. UBS stands out as particularly cautious and prudent with its capital since the 2008 rescue. A more relaxed stance would serve its private bank, where the wider industry is generally playing looser with balance sheet to win clients. Compared to Credit Suisse and Julius Baer, UBS is a cautious lender to the wealthy.
More risk would be advisable – and is a probable option for UBS’ wealth arm to return to healthy growth rates.
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