Revenues For UBS’s Wealth Management Business Could Cross $19 Billion In Five Years

by Trefis Team
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UBS’s focus on its cornerstone wealth management business significantly increased after the financial crisis. After the economic downturn, the financial giant decided to cut back its investment banking activity and increased its focus on the wealth management business in view of stricter regulatory requirements. Additionally, in 2011 UBS was hit by the rogue trader scandal which resulted in a $2-billion trading loss – forcing the bank to reorient itself around wealth management and limiting its sell side operations.

Trefis has summarized the changes in the bank’s wealth management business in its interactive dashboard – How Has UBS’s Wealth Management Business Changed Over The Last 10 Years, And What’s The Forecast Over The Next 5 Years?  Additionally, you can see more Trefis data for financial services companies here

How Has UBS’s Revenue Composition Changed Over The Last Decade And What’s The Forecast?

A timeline of change in UBS’s revenue composition:

  • 2006: Before the 2008 recession, Wealth Management (WM) and Trading Revenues contributed equally (around 35%) to UBS’s total revenues.
  • 2014: After 2012, UBS significantly reduced its trading operations and increased its focus on the wealth management business. As evident from 2014 numbers, UBS was largely successful in overhauling its business model, with WM’s contribution to total revenues increasing to 53% while trading revenues fell to just 18% of total revenues.
  • 2018: Wealth management now accounts for more than 55% of UBS’s total revenues while Trading division’s contribution has remained stable around 18%.
  • Trefis projects wealth management’s contribution to remain stable around 55% over the next few years. This represents an increase in these revenues from just under $17 billion in 2018 to $19.2 billion in 2024.

How Has UBS’s Wealth Management Business Evolved Since The Economic Downturn?

  • An increase in the number of high net-worth individuals, as well as an increase in their assets, has helped UBS increase its client assets from around $1.6 trillion in 2006 to over $2.2 trillion in 2014. Upbeat market conditions coupled with new money inflows helped this figure reach $2.3 trillion in 2018, although a reduction in valuation across asset categories weighed on the client base in late 2018.
  • Moreover, UBS increased its foothold in the Asia-Pacific region over the last decade, as individual wealth for Asian citizens grew at a faster pace than their European counterparts. As a result, Asia’s contribution to UBS’s client assets grew from around 7% in 2006 to more than 15% in 2018. Trefis expects this contribution to reach around 17% in 2024.
  • UBS’s fees have remained around 0.8% of client assets over the last 15 years, as an increase in asset base has been accompanied by a similar increase in revenues. Trefis expects the average fees to remain around 0.7% over coming years.

How Do Changes In UBS’s Wealth Management Business Compare With That For Peers?

  • UBS’s focus on wealth management business since the economic downturn has helped its contribution to total revenues to increase from less 35% in 2006 to more than 55% in 2018.
  • Swiss banking giant Credit Suisse has also focused on expanding its wealth management business over the years. Credit Suisse’s wealth management business now contributes 40% of its total revenues as compared to less than 30% before the financial crisis.
  • However, the largest American bank JPMorgan has a much more diversified business model and has been able to achieve growth on all fronts since the downturn – especially since it added Bear Stearns investment banking operations to its own in 2009. As a result, contribution of its Wealth Management business to its total revenues has largely remained stable around 12%.

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