UBS AG, one of the world's leading private banks and asset managers is embarking on a new strategy to help mitigate its costs, part of an effort worth upwards of $1 billion over the next few years, according to a Reuters report.
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UBS like many other banks in Europe have had profit woes in recent quarters, capped off by an ongoing tug-of-war between shareholders’ expectations and lackluster earnings. Traditional names such as Deutsche Bank, Standard Chartered, and Barclays have each resorted to different measures to help undercut costs, with job cuts being the most utilized strategy.
Asset management as a whole has been one of the lesser profitable sectors in 2016, though other units such as fixed income and foreign Exchange (FX) have also seen large-scale cuts, with London being the epicenter for such practices. UBS has opted to take a different course, instead standardizing its IT platform for its wealth management business.
Such an investment would go a long way into helping slim down the costs of the global banking giant, however $1 billion is hardly a paltry sum of money given the weakened state many lenders have found themselves in. A more cohesive infrastructure could however pay immediate dividends, with such a wide global focus historically tying up large amounts of cash and human capital.
The wealth management business at UBS is the group’s flagship unit, which has long weathered other storms in the industry and banking sector, en route to routine profits. However, recent years have seen an uptick in labor costs and other operating functions, with IT and backoffice jobs being axed en masse at other lenders.
Upgrade Underway
A large investment to this area could be enough to allay recent concerns facing UBS, though its unknown how large of savings the Swiss lender plans to reap as a result of the investment. The upgrade and investment is already underway, with its roots tracing back to 2013 – the group’s IT structure, known as One Wealth Management Platform, is targeting a 2018 finish.
Once completed, a newly integrated IT structure at UBS will help streamline a number of digital functions, such as an entirely new online wealth management platform, SmartWealth. UBS is also hoping that its SmartWealth platform will target new audiences and clients, including high earning individuals in the private banking sector.
