Performance and Prospects of Union Bank of Switzerland
UBS is one of the best-capitalized financial institutions in the world, with invested assets of 2.2 trillion Swiss francs, shareholders' equity of 35.4 billion Swiss francs and market capitalization of 95.4 billion Swiss francs. UBS is present in all major financial centers worldwide, with offices in 50 countries. UBS employs 65,929 people, 40% of whom are located in Switzerland, 39% in the Americas, 15% in Europe and 6% in Asia.
As an integrated firm, UBS creates added value for clients by drawing on the combined resources and expertise of all its businesses. As an organization, UBS combines financial strength with a global culture that embraces change.
In the 10 years before their merger, both banks had made a series of purchases to increase their investment banking presence. The most significant was the 1995 acquisition of SG Warburg, a venerable London investment-banking firm, by SBC. S.G. Warburg, was founded London in the 1930s and reached prominence after the Second World War.
UBS' strengths have traditionally lain in Europe. But the bank is seeking to raise its game in the US. In the 1990s in the US, it acquired Dillon Read, a corporate finance specialist and O'Connor, a derivatives specialist. In 2000 it acquired Paine Webber, a US Stock broker and investment bank for $10.8bn (8.3bn, $5.7bn). UBS has also been boosting its US corporate finance and equities teams with additional hires.
UBS has almost $2 trillion in personal and corporate assets invested, among the world's largest asset pools. With acquisitions such as Sauerborn, UBS is pursuing a bold strategy that is not without risks. It is expanding rapidly beyond its Swiss base. It is also taking on clients, such as those at Sauerborn, who had chosen not to put their wealth in the hands of a big institution and who may be skeptical about staying with a money manager as giant as UBS. But UBS figures if it can win the confidence of these top business families its position in Europe's largest economy will get a boost.
By reinventing the art of Swiss banking, UBS has quietly become one of the globe's most profitable financial institutions. Morgan Stanley (MWD ) forecasts UBS's pretax profits at $8.9 billion in 2005, an 8% year-on-year gain following a 41% leap in 2004. Revenues are forecast to hit $37 billion. Return on equity, Morgan Stanley predicts, will outpace a wide range of competitors, including Citigroup (C ), Goldman Sachs (GS ), and Credit Suisse Group (CSR ). Last year, ROE came in at a hefty 25.5%, well above Goldman's 19.8%. In the first quarter of 2005 net profits rose 8%, to $2.2 billion, and ROE hit 32.4%. UBS's own private-banking business, which has margins of close to 50%, has ample room to grow. Unlike investment banking, where a handful of players dominate, the wealth-management industry remains fragmented. UBS leads with only a roughly 3% share of what it estimates to be a $30 trillion market. And UBS chief Peter A. Wuffli is confident that more boutiques such as Sauerborn will become available as the increasing cost of regulation makes life tough for smaller wealth managers. "We feel we are just at the tip of the