UBS Plans Asia Advisory & Capital Markets Expansion

by Trefis Team
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The largest Swiss bank, UBS (NYSE:UBS), is reportedly keen on growing its corporate advisory and capital markets presence in Asia over the coming years – a move that is in stark contrast with the bank’s decision to slash as many as 10,000 jobs across its global operations announced late last year (see Poor Performance Forces UBS To Announce Drastic Job Cuts). [1] In fact, the renewed focus in Asia, marks a complete reversal in the bank’s outlook for the region from less than a year ago when it began downsizing its investment banking operations there (see UBS Swings The Axe In Asia Amid Weak Banking Environment).

Many of UBS’s peers do not share the same enthusiasm for the region – at least not yet – Morgan Stanley (NYSE:MS), Barclays (NYSE:BCS) and Deutsche Bank (NYSE:DB) are in the process of trimming their presence in Asia to varying degrees.

We maintain a price estimate of $18.50 for UBS’s stock, which is about 15% ahead of its current market price. The negative sentiments among investors for the European banks in the wake of the continuing debt crisis and the botched-up bailout of Cyprus is largely responsible for this difference.

See our complete analysis of UBS here

UBS has been going through a rough patch of late with the Swiss banking giant coughing up $1.5 billion late last year to settle LIBOR manipulation charges leveled against it by U.S. and U.K. financial regulators (see UBS Settles Libor Manipulation Charges At A Whopping $1.5 Billion). And even as investors questioned the bank’s business model, matters were only made worse by the fact that Swiss regulators imposed the world’s most stringent capital requirement norms for the country’s banks.

In response, UBS had to announce drastic changes to its operations, with the bank pledging to focus on its wealth management business and almost completely shuttering its fixed-income business. It began to cut down on its workforce to achieve the 10,000 reduction in headcount by the end of the year. But it looks like the bank has a sharper eye on the sustainability of its business – and quite rightly so.

This is what clearly is behind UBS’s decision to expand its corporate advisory and capital markets offerings in Asia with plans to increase headcount by 10% over the next three years. The bank is optimistic about the region’s outlook and given the fact that it does not have a sizable presence in the fragmented Asian investment banking market, the plan to scale up while competitors are retreating would potentially allow it to garner a bigger share in the years to come.

Considering the fact that UBS had about 16,000 investment banking employees at the end of 2012, with employees in Asia estimated between 10-15% of this figure (i.e. 1,600 to 2,400 employees), this plan entails the addition of around 200 new jobs across the business in Asia. Hopefully, the additions will help UBS gain more ground in Asia’s M&A advisory, debt origination and equity origination markets.

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Notes:
  1. UBS to Expand Asia Corporate Advisory Headcount by 10%, Bloomberg, Apr 10 2013 []
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