On September 1, Iqbal Khan officially commenced his new role as the leader of UBS’ Asia business. He will face a number of challenges in the region including geopolitical risks, China’s slowing economy and more.

Effective as of yesterday, UBS welcomed Iqbal Khan as its new Asia Pacific president and co-president of global wealth management, based in Hong Kong, succeeding Edmund Koh. This is a historical milestone for the Swiss financial giant as it has placed a divisional president in Asia for the first time ever.

Celebrations aside, the new role is not expected to be a walk in the park for Khan. finews.asia takes a look at the top challenges the enlarged Swiss bank faces in the region. 

1. AUM Momentum

At the end of June, assets under management (AUM) at UBS Global Wealth Management (GWM) in Asia totaled $627 billion. While the bank recorded another quarter of net new inflows ($8.2 billion), its AUM has shrunk two quarters in a row since peaking in end-2023 at $645 billion.

The expected upcoming interest rate cuts could act as an additional tailwind for the bank via positive market performance, as looser monetary policy has historically boosted risk assets. But there is also the possibility of outflows further down the line. According to Martin Schilling, a banking expert at PwC, many former Credit Suisse clients are initially switching to UBS and waiting with a redistribution of assets to rivals to «occur no earlier than in one to two years».

2. Legal and Regulatory Affairs

In taking over Credit Suisse, UBS has inherited the good with the bad, including legal and regulatory affairs.  

Currently, authorities, including the Hong Kong Competition Commission, have requested documents and information for inquiries, investigations and actions related Archegos Capital Management, the New York-based family office that collapsed after defaulting on major margin calls. 

There are also other looming concerns. In Singapore, Credit Suisse was found to be the bank with the largest amount of funds linked to the S$3 billion ($2.3 billion) money laundering scandal. Investigations are ongoing and no action has been taken against the Swiss bank so far.

3. Interest Rate Cuts

In late August, US Federal Reserve chair Jerome Powell signaled that there would be a policy pivot towards defending economic expansion, noting that he was confident that «inflation is on a sustainable path back to 2 percent» and that «further cooling in labor market conditions» was not welcome.

Though this could potentially bode well for risk assets, UBS will nonetheless face the industrywide challenge of lower interest income. The group already saw net interest income globally fall 21 percent quarter-on-quarter and 10 percent year-on-year to $1.5 billion in the second quarter of 2024, with Asia’s wealth business also taking a hit.

4. Geopolitical Tensions

On the geopolitical front, tensions between China and the US, where UBS’ fellow GWM co-head Rob Karofsky is based, are expected to remain elevated regardless of who wins the upcoming American elections.  

Future tariffs will create economic friction throughout Asia. And if cross-strait relations between China and Taiwan worsen, there could also be the risk of sanctions which could further put a strain on business.

5. China’s Slowing Economy

In the second quarter of 2024, China’s economy grew 4.7 percent year-on-year, missing analyst forecasts and further slowing down from the 5.3 percent recorded in the first quarter. 

A continued slowdown will put pressure on UBS’ regional business. Prior to the Credit Suisse takeover, UBS was relatively more dependent on Greater China. While the takeover has diversified its business with significant wealth management share gained in southern APAC, the bank's considerably enlarged size means that dependence on any single sub-region may not result in significant growth.