UBS pushes U.S. wealth expansion as Swiss capital rules raise costs

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UBS pushes U.S. wealth expansion

Highlights

UBS's Americas wealth business posted $448mn pre-tax profit and 13.7 per cent margin in Q1, progressing towards its 15 per cent 2026 target.
UBS plans to use its U.S. banking licence to offer checking, deposits, payments, and lending products from H2 2027, targeting a rise in deposit and lending revenue share to 27 per cent.
Switzerland's proposed 'too big to fail' reforms may require UBS to hold about $22bn additional capital for foreign units, making the U.S. business its most capital-intensive segment.

U.S. wealth strategy faces execution test

As reported by Financial Times, UBS is centering its U.S. wealth management business in its effort to improve profitability and close its valuation gap with Wall Street peers. The Swiss bank sees the U.S. as a crucial market because it holds almost half of the group’s invested wealth assets and the largest pool of private wealth globally.

Chief executive Sergio Ermotti made fixing the U.S. wealth business a priority in early 2024 after the Credit Suisse takeover added scale in other regions but did little for UBS’s American ambitions. At the time, the Americas wealth unit was generating a pre-tax margin of less than 10 per cent, well below major U.S. competitors such as Morgan Stanley, whose wealth division reported a 29 per cent pre-tax margin last year.

UBS is trying to lift profits, bring in more client money and deepen banking relationships with wealthy Americans. That effort has been disrupted by adviser departures, client outflows over three straight quarters last year and an unpopular change to adviser compensation that removed a long-standing revenue-sharing system for teams.

The bank has since revised parts of its compensation structure, and there are signs the overhaul is starting to improve results. The Americas wealth business posts $448mn in pre-tax profit in the first quarter, and margins rise to 13.7 per cent, closer to UBS’s 15 per cent target for 2026, while management expects net client inflows for the full year despite seasonal second-quarter outflows.

UBS also plans to use its national U.S. banking licence, approved in March, to broaden its offer beyond investment advice. The licence is set to let the bank add checking accounts, deposits, payments and lending products, with the first products expected in the second half of 2027.

The bank estimates its clients hold about $150bn of deposits with rival institutions. UBS wants to increase the share of revenues from deposits and lending to 27 per cent from 17 per cent, a shift some executives believe could eventually lift U.S. profit margins to about 20 per cent.

Capital pressure and competitive gap remain

Even with recent improvement, UBS remains materially less profitable in U.S. wealth management than Morgan Stanley, Bank of America and JPMorgan. Adviser numbers continue to decline in the first quarter to 5,722 from 5,884 a year earlier and 6,079 in the same period of 2024, although recent departures are stabilising.

UBS says in a statement that its U.S. wealth management business is in a multiyear strategic transformation that is ahead of schedule and is already delivering significant increases in revenue and profit. Still, RBC Capital Markets analyst Anke Reingen says the first quarter is encouraging but investors still need more proof that the turnaround is sustainable.

The bank is also trying to widen its client base beyond ultra-high-net-worth customers, a group that accounts for about 55 per cent of its U.S. assets, according to people with knowledge of the business. Executives believe faster growth may come from attracting clients with smaller fortunes while maintaining its traditional focus on the ultra-rich.

A larger risk comes from Switzerland’s proposed 'too big to fail' reforms unveiled in April after the collapse of Credit Suisse. The government wants UBS to hold roughly $22bn in additional capital against foreign subsidiaries, with the U.S. business accounting for the biggest share, potentially making America the most capital-intensive part of the group’s global wealth strategy.

That creates a strategic tension for UBS, because the same market seen as central to closing its valuation gap is also the market likely to absorb more capital. Even so, Ermotti and chair Colm Kelleher do not see a retreat from the U.S. as an option, and management continues to argue that the bank’s biggest long-term opportunity remains across the Atlantic.

First Hawaiian’s planned $2.0 billion all-stock acquisition of TriCo Bancshares would significantly expand its mainland footprint, giving it immediate scale in California and creating a combined bank with about $34 billion in assets. Our earlier article also noted that the deal’s expected balance-sheet and capital profile—including a pro forma CET1 ratio around 12.4% and a larger share of mainland loans and deposits—would be central as the merger works through approvals toward a targeted end-2026 close.

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