After five weeks in office, Iqbal gives Khan at the UBS through the tariff. In an internal message, Khan instructs his employees to open the cash locks and provide credit to wealthy customers. So his department, the Global Wealth Management, can achieve "quick wins". "Lending is definitely an area where we could do more," Khan quotes in the message.
The ambitious banker wants to put the UBS assets division, whose co-CEO he is, on a growth course. "We have to make sure that we not only keep our competitors at bay, but also increase the distance to them," writes the 43-year-old, who has been blustered by the Credit Suisse changed to UBS. Credit Suisse had the renegade Kadermann shadowed after his termination.
Khan: "Much of what we can get going"
In the memo to his workforce Khan counts next to the lending on other areas in which he wants to grow. He names unlisted stocks (private equity), private debt (private debt), infrastructure and other unspecified asset classes. Which banking activities he wants to connect with, does not emerge from the memo.
In addition, the banker sees opportunities in a closer integration of the asset management business with the investment bank and asset management. "There is still much that we can get going," he writes in a memo about which the "Bloomberg" agency first reported. It was not to be expected that Khan would publish concrete ideas and instructions after only thirty days in office. A few weeks ago, UBS CEO Sergio Ermotti said he would give his new man sixty days to familiarize himself with the bank and its clients. "In early December, he will introduce his first ideas to us together with Tom Naratil," said Ermotti. Now Khan set off earlier a fragrance brand.
After the state rescue, UBS shied away from the risk
Tom Naratil also wants to grant more loans. The American, who manages world-wide asset management with Khan, said in an interview with the Reuters agency recently that he plans to double the profits of North and South America over the next ten years, from $ 1.5 billion to $ 3 billion. Customers should no longer manage their portfolios themselves, but switch to mandates, which is more profitable for UBS. And customers should get more money to speculate on the markets with a bigger stake.
That the bank opens the credit locks is equivalent to a paradigm shift. After the financial crisis and the rescue of UBS by the Confederation, the big bank swore off risk business. At the latest after the billions flop of the dealer Kweku Adoboli established itself in the UBS a "very risk-averse culture", as it describes a high Kadermann. Jurg Zeltner, the former head of wealth management, routinely bit on granite when he called for additional lines of credit to leverage client portfolios.
A look at the bank's annual reports shows that it has $ 171 billion in loans in the global wealth management business. The largest chunks are mortgages ($ 53 billion) and so-called Lombard loans backed by securities ($ 89 billion). According to the annual report, the loans amounting to 10 billion are covered by guarantees and other unspecified securities (collaterals). Again, over a billion are unsecured loans.
There are many indications that UBS not only wants to expand its Lombard loan book, but also wants to grow with structured loans. These are complex financing instruments, which are in demand mainly from the super-rich of the world. These can be special financing vehicles for the purchase of yachts or private jets. Or credit lines for entrepreneurs or commodity traders who borrow their own illiquid shares.
When Iqbal Khan was still with Credit Suisse, his department built a lot of knowledge about such highly complex but risky financings. Critical financial analysts were concerned about the increase in risk on Credit Suisse's balance sheet, as the SonntagsZeitung reported in its last issue.
By awarding more loans, UBS wants to kill several birds with one stone. The bank has significantly more deposits than loans in its balance sheet. The excess of deposits must be invested with the National Bank, whereupon negative interest rates are due. If the bank now grants more loans, it reduces the surplus and consequently has to pay less negative interest. As Lombard loans and mortgages yield higher interest rates than safe government bonds, which also bear negative interest rates, the bank can increase its revenues.
More customer funds, higher commission income
The second advantage: if the bank provides its customers with loans, they can speculate on them with a higher stake in the markets. A liquid equity portfolio can be borrowed to about 70 percent. This means that the bank can automatically manage more client funds and hope for higher commission income. The so-called net new money, an important parameter for the assessment of a bank, so shoots up.
UBS writes in a statement: "Financing is a high priority for our customers and therefore also for us, but our risk appetite and our risk limits are therefore not changing."
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Created: 09.11.2019, 19:47