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UBS courts US investment heavyweights to boost valuation

UBS has begun courting large US investment houses to become top shareholders, as the Swiss lender attempts to improve its market value to be closer aligned with Wall Street peers.

New chair Colm Kelleher and chief executive Ralph Hamers have been holding a series of meetings with influential US fund managers in recent months to tempt them to increase their stakes in the bank, according to people with knowledge of the discussions.

The UBS board has grown frustrated that the business — which is the world’s biggest wealth manager — trades at a discount to Wall Street banks, which they believe is due to a negative perception of European and Swiss lenders.

Kelleher and Hamers have embarked on a roadshow to convince US investment heavyweights such as Capital Group, T Rowe Price, Wellington and Fidelity to ramp up their holdings in the group.

UBS declined to comment on the meetings.

UBS is one of Europe’s most valuable banks, with a price to book ratio — which compares its market value with its total assets — of 1, compared to 0.3 for Credit Suisse, Société Générale and Deutsche Bank, 0.4 for Barclays and 0.6 for HSBC.

By comparison, Wall Street lenders JPMorgan and Morgan Stanley each trade at 1.3, while Goldman Sachs and Wells Fargo are both on 1.

Given UBS’s business is heavily concentrated on higher margin wealth management rather than riskier investment banking, the bank’s board believes it has the potential to have a market capitalisation of twice its book value, according to people familiar with their thinking. They are trying to convince investors to see it as a global bank with Swiss roots, rather than a European institution.

“If we are a European bank with European investors, we will trade at one times book,” said one of the people. “The goal is two times.”

UBS is one of Europe’s best performing banks, not least since the beginning of the coronavirus pandemic two years ago when government stimulus measures helped boost the assets of its ultra-wealthy clients.

In 2021, the bank enjoyed its most profitable year since before the global financial crisis, with continued strong results in the first quarter of 2022 as its traders capitalised on volatile markets.

Under Hamers, who has been at the bank for just under two years, UBS has focused on growing its business in the US, while it has also made long-term investments in Asia in expectation that the market will open up once the impact of the pandemic recedes.

So far he has made one acquisition in the US, the $1.4bn deal for mass-affluent robo-adviser Wealthfront. It was the bank’s first major deal since the financial crisis and is intended as a statement of intent and a signal that UBS is poised to grow 14 years after its Swiss taxpayer bailout.

In April, Kelleher took over from Axel Weber as chair, having previously been president of Morgan Stanley, the bank that is a leader in the US wealth market.

While several US investment managers hold large stakes in UBS — including Dodge & Cox, MFS Investment Managers and Artisan Partners — the bank is hoping the biggest investment groups will match the size of their stakes in US lenders.

Wellington, for example, the Boston-headquartered investment group with $1.4tn of assets, holds a $5bn stake in JPMorgan, a $2.8bn stake in Morgan Stanley and a $900mn holding in UBS.

Elsewhere, Capital Group owns a $13.4bn stake in JPMorgan, a $3.9bn holding in Morgan Stanley, a $2.2bn stake in Wells Fargo and $1.2bn of Citigroup stock. By contrast, the secretive LA-based fund manager with $2.7bn of assets under management owns just $180mn of UBS stock.

UBS was one of several lenders that Capital cut its stakes in as part of a €7bn sell-off of European bank stocks this year. The Financial Times revealed last month that the disposals were the result of a single influential portfolio manager, Nick Grace, souring on the sector on the back of the war in Ukraine and the threat of a global recession.

Additional reporting by Laura Noonan


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