UBS had the kind of year most of its peers – particularly those in continental Europe – could only dream of.
The world’s leading wealth manager seemed determined to get the bad news out of the way early.
Like other big lenders, it took a hit when Archegos Capital Management collapsed, an event that left the bank feeling “very disappointed”, says chief executive Ralph Hamers, who joined from ING in November 2020.
The hedge fund’s collapse cost UBS $861 million, but it could have been much worse.
In the end, net income in the first quarter came in 14% higher year on year, at $1.8 billion, outpacing analyst estimates.
That is when the year really got going. UBS posted a pre-tax profit of $2 billion in the three months to the end of June, up 63% year on year, thanks to a strong performance from wealth management.
Its third-quarter figures were even better. The bank posted a pre-tax profit of $2.28 billion, a rise of 9% on the previous year, boosted by strong global banking income growth of 44%.
“The fact that we continued to collaborate so closely, and even delivered our highest third-quarter profit in over a decade, is a testament to the strong relationships we’ve built with our clients over time,” Hamers tells Euromoney.
Its common equity tier-1 capital ratio stood at 14.9% at the end of September 2021, up 0.4 percentage points quarter on quarter. Return on equity at the same time was 15.3%, against 11% at the start of the year.
Hamers says the past year has presented “challenges” in terms of coping with restrictions and navigating how the bank works and interacts.
“As a new CEO, I wanted to be able to meet with different teams and clients around the world in person, but it has only been recently that this was possible,” he says. “These trips really reinforced the importance of face-to-face communication.”
The Dutchman knows that with UBS in robust financial shape, radical surgery isn’t needed.
The fact that we delivered our highest third-quarter profit in over a decade is a testament to the strong relationships we’ve built with our clients
Ralph Hamers
So he has quietly gone about imposing his vision. In November, it was announced that dozens of top executives would lose their prized rank of group managing director, in a move to simplify the executive structure.
A cost-cutting push is expected in 2022, as he seeks to push the bank’s book value (0.98 as of November 29) closer to the likes of Goldman Sachs (1.35) and Morgan Stanley (1.79).
Another notable event will be the expected launch next year of a digital bank in the US, targeting affluent customers with $250,000 to $2 million in assets as part of a strategy update that Hamers will deliver in early 2022.
That project should benefit from the arrival of Colm Kelleher as chairman. A 30-year veteran of Morgan Stanley, Kelleher is slated to succeed Axel Weber when his mandate ends in April.
Asked to name key factors set to impact UBS in 2022, Hamers sorts them into two boxes: macro and external; and cultural and internal.
With the first, he highlights Covid’s effects on sectors, labour markets and supply chains; as well as the potential for geopolitical tensions to stunt growth and for inflation to result in more restrictive monetary policy.
With the second, he points to the bank’s ability to adapt to a fast-changing world.
“One of the factors that I think will have a big impact on UBS is how well we’re able to transition to more agile, flexible and digitally savvy ways of working,” he says. “So far though, we’re already well on the way, as we expect to successfully transition 9,000 employees to agile by the end of the year.”
