UBS Group’s more diversified wealth management exposure and business mix makes it more attractive than US peer Morgan Stanley, according to analysts at JPMorgan Chase & Co.
While both firms are forecast to generate about 60% of earnings from asset-gathering businesses in 2027, JPMorgan analyst Kian Abouhossein said the Swiss bank has a better wealth management franchise than Morgan Stanley outside of the US. It’s helped by being highly geared to Asia, which is seen as the “sweet spot.”
In addition, UBS has a domestic Swiss bank that is effectively a cash cow and an investment bank consuming no more than 25% of group risk-weighted assets, as opposed to 50% at Morgan Stanley.
“UBS in our view has a better business mix than Morgan Stanley,” Abouhossein said in a note on Friday.
The Swiss bank is already the undisputed top wealth manager in many parts of the world, but not in the US, the largest market for wealth management services. CEO Sergio Ermotti has signaled that the US will be a major plank of its growth strategy.
The bank is vying for primacy in global wealth management, seeking to boost its valuation to a par with US rivals. UBS chairman Colm Kelleher – who formerly served as president of Morgan Stanley – has said that he thinks UBS should be valued as highly as some of its US peers.
UBS has been making quick progress on integrating Credit Suisse since it agreed to buy the smaller rival in an emergency takeover a year ago. But the acquisition still comes with a raft of potential difficulties, from closing out positions to managing legal liabilities.
“Going forward, we do not expect UBS’ valuation discount versus Morgan Stanley to close, but believe it can narrow,” the JPMorgan analysts said in the note. Drivers for this include the earnings benefits of the Credit Suisse acquisition and the potential for higher capital returns.
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