Gains in a third – inside Paradeplatz

UBS has indigestion: CS deal weighs on it.

This is evident this morning with amazing clarity. The widely expanding private banking sector experienced a real recession in the October-December period.

Pre-tax profits fell from $1,058 million to $381 million. Minus 64 percent, which is almost a third.

There were some special effects, such as the write-off of $190 million of investment in the Swiss Stock Exchange Group and $60 million in the United States of America.

For “special scrutiny… in connection with the collapse of Silicon Valley Bank and Signature Bank.”

interesting. The other important thing is that Khan lost control of costs in his empire.

In the fourth quarter of 2022, this number reached 4.6 billion, and in the last three months of 2023 it rose to 5.1 billion.

The opposite is income development. While these reached $5.5 billion at Khan Global Wealth Management in the fourth quarter of 2022, they fell to less than $5.1 billion in the corresponding quarter of 2023.

High costs, low returns: No wonder Khan went under.

It's obvious when CS is incorporated, right?

no. Swiss bank UBS, under Sabine Keller Busse, also suffered a significant loss in valuation, and there are additional costs due to the acquisition.

But the head of the domestic business managed to increase its profits in the fourth quarter: from 529 million, as was the result from October to December 2022, to 788 million in the corresponding quarter of 2023.

381 million profit in asset management, 788 million plus in Switzerland: sell Khan, buy Busse.

You rub your eyes. Especially since Iqbal Khan's large division, which makes up half of the giant bank, has generated little in terms of new money.

“Net new financial flows amounted to US$21.8 billion,” UBS said earlier today about its global asset management portfolio. A small amount of the 3.9 billion client assets under management are reported there.

Khan's plight is directly linked to his performance as CEO of global private banking. He lured his comrades with large rewards. This is what appears from the following passage in today’s statement:

“Operating expenses increased by 43% to US$5,070 million. The main reasons for this were the consolidation of Credit Suisse expenses, integration-related expenses, and higher variable pay for financial advisors.

High Rewards – Khan gilded his favorites. On the contrary, they did not achieve the desired profit.

The bizarre collapse in profits at the asset manager was accompanied by a real fiasco at the investment bank in the fourth quarter.

It's in red. And clearly. A loss of 280 million if you ignore the additional factors. In the comparative quarter of 2022, there was still a profit of 112 million.

The misery in the wealth management and investment banking divisions led to the group's loss in the fourth quarter of 2023, which is food for thought.

751 million red.

What's going on there?

Things should improve soon. The goal is to save $13 billion by the end of 2026, half of it in 2024.

The central cost-income ratio will then fall to the minimum target of 70 per cent.

In the banking sector, saving means laying people off. In the fourth quarter, UBS reduced its workforce from 116,000 to 113,000 people.

This will continue. CEO Sergio Ermotti decided to extract the salami. How many employees will eventually lose their jobs, and how many jobs will disappear in 3 years:

This remains his secret. What is certain is:

If only half of the $13 billion went to cutting employee expenses, the reduction would be in the tens of thousands.