UBS Focuses on Asia-Pac Wealth Management Growth
UBS (NYSE:UBS) is a financial services firm that offers a strong combination of wealth management, asset management and investment banking services on a global and regional basis. UBS competes Morgan Stanley (NYSE:MS), JPMorgan (NYSE:JPM), Credit Suisse (NYSE:CS), and Goldman Sachs (NYSE: GS) in trading, investment banking and asset management services. We have a $19.80 price estimate for UBS, which is slightly ahead of the current market price.
We estimate that wealth management is the largest driver of value for the company, contributing around 43% to its stock price. UBS is looking to improve its wealth management business in the Asia-Pacific wanting to grow at double the market growth rate in this region. UBS is currently the leading wealth manager in the Asia-Pacific, with the clients assets managed totaling around $178 billion last year.
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The economic growth in Asia is much higher than the growth in the U.S. and Europe leading private banks across the world to ramp u their expansion plans in this region. Accroding to a Merrill Lynch-Capgemini wealth report, the number of millionaires in the Asia-Pacific has increased to over three million. In addition to this, the market size, that is the combined wealth of Asia-Pacific high net worth individuals, is estimated to grow at an annual rate of 8.8% over the next seven years, around 150 basis points higher than the global average growth rate.
To boost its international wealth management business, UBS is planning to hire several relationship managers every year, with a higher proportion hired in Asia. In the near future the bank expects to increase the number of relationship managers to 1,200 from 900. [1]
Assets under management for international clients (clients from regions other than Switzerland and the Americas) decreased to $570 billion in 2009, a consequence of the global economic downturn between 2007 and 2009. However, with the economic environment improving in 201o, asset under management increased to $631 billion.
Going forward, we expect it to increase to around $860 billion by the end of our forecast period at an average annual growth rate of 4.5% as the improving economic environment should revive demand for wealth management services. However, if UBS can leverage its position in the Asian market as the market leader and further expand its reach in this high growth market, there could be upside to our forecasts.
If the asset under management for this region increase at an average annual growth rate that is 220 basis points higher than our current estimates reaching $1 trillion by the end of our forecast period, it would result in an upside of around 6% to our current price estimate for UBS’s stock price.
See our full analysis for UBS.
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