Comment: The end of private investment banking at UBS
The stresses and strains of the integrated banking model has finally become too much for UBS to bear with the news today that the bank plans to split its business into three separate units.
For the bank’s very wealthy customers the integrated bank concept meant access to some of the sexier products and services normally reserved for institutions. For UBS the model meant a steady stream of cross referrals from the investment bank to its wealth management unit and vice versa.
But, faced with mounting pressure on the bank’s share price from write-downs at the investment bank and a need to make major strategic changes to placate sceptics, UBS needed to reform its integrated banking model.
With all the bad publicity linked to the write-downs at the investment bank, UBS also realises that the reputational risk issues associated with the crisis was beginning to see wealthy clients take their money elsewhere.
That stark reality was revealed in the bank’s second quarter results that showed outflow of money from its global wealth management operations total more than SFr17bn, compared with an inflow of SFr35.2bn a year ago.
But can UBS’s wealth unit function as well without the link with its investment bank?
No doubt the bank will be a lot less well placed when competing for the “private investment banking” client – typically the very rich. The integrated model in terms of cross referrals has been very successful for UBS in Asia, where clients particularly like the link with the investment bank.
And UBS will be particularly galled to see its great Swiss competitor Credit Suisse is redoubling its efforts to go after the ultra-rich, emphasizing its “one-bank” strategy in recent months.
But UBS needs to make radical changes to its business – even if that means one day becoming a stand alone wealth management operation in the same vein as its Swiss compatriots Julius Baer and Sarasin have achieved so successfully.
del.icio.us
Digg
Newsvine
reddit
StumbleUpon