UBS, the industry leader in Asian private banking, raked in billions in new money in the first quarter of 2019, but earnings took a tumble.
UBS’ gargantuan wealth management franchise in Asia is the one bright spot in otherwise bleak first-quarter numbers released by the Swiss bank. Even though the 64 percent plunge in investment banking profits dominated headlines, it is the stasis in its core wealth management business that is most worrying.
Deleveraging and reduced client activity have hit the top line in the first quarter – earnings fell 21 percent to $873 million at the wealth management unit. Increasing competition amongst private banks impacted margins.
Focus on Front Office Staff
However, the bank continues to be leagues ahead of the competition in terms of asset gathering – $22 billion in net new money for the first three months of the year, a record $16 billion of which came from the private bank in Asia.
The figures accurately reflect the bank’s focus on assets under management. The Swiss bank employs twice the number and frontline staff in Asia as its closest competitor, Credit Suisse, and its asset stockpile is the largest in the industry by far. Most recruitment at the bank is focused on front office staff and mini armies of multiple teams serve large markets like Hong Kong and offshore China.
More for the Money
Stakeholders, however, want more for their money than just the marketing cachet of being the biggest in the industry. «Bankers won’t get rewarded for bringing in assets if there are no profits to go with it,» said one headhunter familiar with the situation.
Shareholders will also tire of an inflated top line that does not trickle down to the bottom line because while it is comforting that clients are willing to open new accounts and top up existing ones, it doesn’t matter for much of it does not lead to an increase in revenues.
Time for More Innovation?
Given that the lender has already celebrated its position as the asset leader in the region, could it be time now for it to focus on efficiencies and innovation?
