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UBS said to target topline acceleration at investment bank
UBS Group AG plans to focus on growing its merger and IPO advisory business over coming years to offset industry-wide headwinds in trading, sources familiar with the matter said.
Across the investment bank, revenue may grow by several hundred million Swiss francs annually over the next three to four years, while it keeps costs in check, according to one of the sources. The securities unit had total sales of 7.7 billion Swiss francs (S$10.3 billion) last year, in line with 2016 and below the 8.8 billion francs achieved in 2015.
In equities trading, the bank is targeting gains in market share as some European rivals retreat, while low volatility and increased regulatory demands weigh on margins across the industry, the sources said.
The investment bank's plan is being assessed by the supervisory board as part of its regular review, the sources said. The broader strategic focus of Switzerland's biggest bank is expected to remain the same and the allocation of risk-weighted assets to the securities unit - the funds it can deploy - is unlikely to change, they said.
"We review all our businesses with the board of directors on an annual basis," a spokesman for the bank said by e-mail. "We've always been focused on profit as opposed to top line and CCS has always been targeted as an area of growth, but with strict discipline."
The corporate client solutions unit, or CCS, which advises on dealmaking, is viewed as critical to service wealthy clients from the private bank, the sources said. Still, the introduction of new capital requirements in December, as with other regulatory developments, could lead to adjustments in trading activities which the company reassesses on an ongoing basis, they said.
"Trading has been under pressure for various reasons for a number of years and now there's also MiFID II regulation," said Andreas Venditti, a bank analyst at Vontobel in Zurich. "This year, UBS had a decent first quarter so it was a good starting point. Also, there is the assumption that compared to last year there will be an environment of higher volatility, which helps trading."
In the first quarter, the investment bank beat estimates, with better than expected revenues from equities trading as well as in CCS. Andrea Orcel, the Swiss lender's investment bank chief, has been ramping up demands on staff, setting ambitious targets for client meetings in an effort to bolster dealmaking.
Mr Orcel has pledged to pursue a "a very aggressive plan" to grow in the US by recruiting marquee bankers to handle M&A - a region where the firm has sought to hire in recent years while struggling to win more market share. UBS' overall tilt towards wealth management is leaving the investment bank with an increasingly smaller share of revenues and a so-called 'capital-light' business model.
In Europe, the bank has recently seen some high-profile exits. Severin Brizay, the head of mergers and acquisitions for the region, is leaving to join Bank of America Corp, sources said, while private equity adviser Laurent Dhome is also quitting, they said.
Jonathan Alpert, who oversaw the European insurance advisory business, left for Bank of America in March and took a few colleagues with him, they said. Barclays Plc last month hired three UBS bankers for its global consumer and retail group.
Still, UBS this year has hired about a dozen managing directors in the US and Europe, including Credit Suisse Group AG's Marco Illy to lead its Swiss investment bank, and Eric Moskal to oversee global industrials in the US. BLOOMBERG