UBS, Credit Suisse’s wealth ambitions in Asia besieged by deleveraging
Both banks posted dismal wealth results in Q1.
The wealth management ambitions of UBS and Credit Suisse in Asia Pacific have taken a rocky turn as the ongoing COVID-19-related lockdowns and uncertainty around the Ukraine-Russia war have turned wealthy clients cautious.
Both banks suffered a drop in assets under management and profits during the first quarter of 2022, and will likely post dismal results for the second quarter, according to a report by S&P Global Ratings.
UBS’s APAC wealth management unit saw operating income slumped to $288m in the first quarter, almost halved from the $468m in Q1 2021. Transaction-based revenues in the region dropped roughly 40%, UBS’ CFO Kirt Gardner reported.
Credit Suisse, meanwhile, had already guided that it is headed toward a loss in the second quarter, marking its third consecutive quarterly loss.
Deleveraging was particularly noted by both UBS and Credit Suisse as factors for their profits and AUM shrinking.
"Our Asian clients do tend to like to use leverage as part of their investment strategy. You see ... sharper deleveraging when they turn negative, but you also see sharper pickup when they turn positive," UBS CFO Kirt Gardner said on the bank’s Q1 earnings call. UBS has suffered three consecutive quarters of deleveraging in Asia, he added.
This scenario will likely remain until the third quarter when Asian markets are expected to reopen and cross-border trades and supply chains are re-engaged, commented Justin Ong, Asia-Pacific asset and wealth management leader at PwC Singapore.
This trend is expected to quickly reverse once market conditions improve, according to S&P Global Ratings analysts, Benjamin Heinrich and Anna Lozmann.
Future prospects bright
Despite near-term challenges, the longer-term prospects of UBS and Credit Suisse remain bright.
“[The region] is one of the fastest-growing wealth markets with a high proportion of young clients and entrepreneurs looking for advice and ways to invest their money globally," S&P’s Heinrich and Lozmann said.
Talent competition will be amongst the biggest challenges for wealth management business in Asia. B UBS and Credit Suisse are already making steady process on their headcounts.
UBS has more than 15,000 staff in the region, equating to 21% of its workforce, according to its latest annual report.
Credit Suisse's headcount in Asia Pacific rose 9.3% between 2020 and 2021. However, the bank;s cost-cutting push is set to hinder its hiring ambitions, S&P noted. CEO Thomas Gottstein recently said that the bank will have to "slow down a little bit" on its plan to annually increase its number of relationship managers in China by a third by 2024.
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