To benefit from the same synergies as U.S. rivals -- with pooled infrastructure and clientele -- Ermotti tasked Tom Naratil, head of the U.S. wealth business, and Martin Blessing, the former chief executive officer of Commerzbank AG, with the merger. Yet the move has been followed by few details since it was announced in January.
‘Show Me’
“The market is definitely in a show-me phase,” Jonathon Fearon, a fund manager who helps manage 648 billion euros ($753 billion) at Standard Life Aberdeen Plc, said by phone, adding that investors want to see an increase in sales and lower costs. “The merger of global wealth management is still to come. They haven’t really articulated yet the synergy there."
An internal strategy update for employees in late June talked of "seamless global business units" and “improving the client experience," while providing little in the way of specifics. At the time, it said the merger would give it more purchasing power because of the size of its asset base, as well as create savings in technology and innovation.
While it may be early in the wealth management merger project, investors would welcome a target for cutting the cost base, Martin Moeller, who oversees around $3 billion for Union Bancaire Privee, said in an interview.
“If it’s 2 percent of the wealth management cost base it would be embarrassing, 5 percent would be neutral, 10 percent -- convincing,” Moeller said.
Valuation Difference
To be sure, investors point to positive flows into wealth management as well as the bank’s efforts to boost capital. UBS, with a market value of about 59 billion francs, has a price-to-book ratio above European peers Credit Suisse, Barclays and Deutsche Bank AG, who’ve been distracted with costly restructuring programs.
Urs Beck, a fund manager at EFG International AG in Zurich, said UBS shares, which currently trade just above 15 francs, have dropped almost low enough to become attractive. He would consider buying at 14 francs.
"UBS isn’t a bad business -- it just trades at a substantial premium to Credit Suisse which we think is undeserved," David Herro, one of Credit Suisse’s largest investors said in an interview with Bloomberg TV earlier this month. The valuation difference “is huge between the two."