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 UBS AG's wealth management department in Beijing. The bank recently established its locally incorporated, wholly foreign-owned bank, UBS (China) Ltd, allowing it to offer a greater range of products and services. Yu Zhiqiang / For China Daily |
Bank boosts wealth management as number of affluent people rises
UBS AG, a leading Swiss Bank, will further strengthen its wealth management business in China, the bank's global chairman, Axel Weber, told China Daily.
This strategy is in line with UBS' global reshuffle that cuts back its investment banking business and places more emphasis on its "core DNA" of wealth management.
"China, as one of UBS' most important markets, will continue to be key for our new strategy," Weber said during his first visit to China after becoming UBS chairman last year.
The bank just opened its locally incorporated, wholly foreign-owned bank, or WFOB, UBS (China) Ltd, which serves as a pillar in UBS' domestic multi-entity platform.
The subsidiary bank status is a critical prerequisite to conducting the broad range of renminbi business, which is key to the success of the firm's wealth management, credit and rates businesses in China.
"It is UBS' plan to be one of the leading wealth management providers in China, and the subsidiary bank is key to reaching this goal," Weber said.
WFOB status allows UBS to offer products and services that include a full range of renminbi trading capabilities in the interbank market, as well as structured and Qualified Domestic Institutional Investors' products.
Around 40 foreign banks, including JPMorgan Chase & Co, Morgan Stanley and HSBC, have already set up China units, and some have been injecting additional capital into them to fuel their expansion.
Globally, the wealth management business accounts for 50 percent of UBS' portfolio. But the figure in China is lower.
The total value of private investable assets in China reached more than 73 trillion yuan ($11.6 trillion) in 2012, up 14 percent from the previous year, according to a report by Boston Consulting Group and China Construction Bank Corp.
By the end of 2012, the number of Chinese high-net-worth individuals - those with investable assets of more than 6 million yuan - will reach 1.74 million, an increase of 17 percent from the end of 2011.
While the emerging affluent population in China provides more opportunities for wealth management business, the rigorous regulations also make it more difficult and challenging for investment banking businesses.
"In the past, two-thirds of UBS' entire capital was tied up within the investment bank, but it only contributed one-third of the group's overall profitability over the last two years," Weber said.
"In the future, investment banking will contribute the same amount to our overall profitability, but will only tie up roughly one-third of the bank's capital. So it is a much more efficient allocation"
In China, UBS has a multi-entity domestic platform, which allows it to develop its core businesses - wealth and asset management and investment banking.
UBS (China) Ltd supports the wealth management and credit and rates businesses.
UBS SDIC Fund Management Co Ltd is a joint venture with the State Development Investment Corp in which, for the first time, a foreign partner holds the maximum 49 percent equity stake.
UBS Global Asset Management (China) Ltd is engaged in domestic non-securities equity investment management and advisory services.
According to Weber, this year's capital market will be much better than the previous three years.
"We expect up to a 20 percent growth in the China equity market this year. If you look at the initial numbers that we started with this year, you've already have a good run in the first few weeks," Weber said.
For Weber, the core challenge UBS faces in China is how to maintain the bank's leadership position in the market.
According to financial services provider Dealogic, in 2012, UBS ranked first in core investment banking revenue for Asia excluding Japan and fourth for China.
It ranked second in completed mergers and acquisitions in China; and third in equity capital market bookrunning.
The bank participated in eight out of the 10 largest Hong Kong IPOs, of which all the issuers were Chinese companies.
"For our team in China, their task is about how to pick up speed now," he added.
huyuanyuan@chinadaily.com.cn
