The asset and wealth management units of UBS had already accounted for a major portion of profits. Following the integration of Credit Suisse, the two businesses will become even more dominant, according to Morningstar.
Already dominant businesses within UBS, wealth and asset management are forecasted to become even greater profit contributors following the integration with Credit Suisse. According to a note by Morningstar, the two businesses are estimated to account for 67 percent of profits by 2027. Meanwhile, investment banking will only contribute 12 percent.
«While the deal is fraught with risks and uncertainty, it also has significant opportunities. UBS acquired talented employees, client relationships, and a significant asset base for a fire-sale price,» said the note authored by senior equity analyst Johann Scholtz and associate equity analyst Svetlana Menshchikova. «We believe that the secular growth story for the wealth management industry remains intact.»
Limit Revenue Attrition
Morningstar underlines that the priority for UBS in the midst of its integration is to «limit revenue attrition, especially in wealth management».
«Revenue retention will allow UBS to absorb some of the significant restructuring costs it will need to successfully deliver the ongoing $8 billion cost-savings it has guided. Cost-savings will be the primary driver of the meaningful earnings accretion we expect,» the note added. «Accounting adjustments and nonrecurring line items will mar UBS' results for the next four years.»
