Ultra-low interest rates are setting a high entry bar for UBS’s new wealth tsar. The Swiss bank has hired Iqbal Khan to jointly lead its $2.5 trillion global private banking arm. Under his leadership, pre-tax profit at Credit Suisse’s smaller international wealth division doubled.
As global growth slows, replicating that performance won’t be easy.
Swiss-born Khan is taking one of the most coveted jobs in private banking, sharing the role with US-based veteran Tom Naratil. The 43-year-old’s focus will be managing over $1.1 trillion of wealthy clients’ assets based outside the Americas, three times the amount of private money he oversaw at Credit Suisse.
His empire will include high-growth Asia, which was not part of his previous brief.
At Credit Suisse, the business Khan ran added about $800 million in adjusted pre-tax profit, growing by around 21 per cent a year while sucking in new client money.
That’s higher than the 10-15 per cent annual growth UBS is targeting over the next three years for its wealth business, which made over $3 billion of pre-tax profit in 2018.
However, the new wealth chief is taking over at a more difficult juncture. Interest rates are at record lows, and official borrowing rates have turned negative in large parts of the developed world. That makes generating decent positive returns for clients all the more important, but also harder to achieve.
The rise of cheap exchange-traded funds is compressing private bankers’ fees, while investments in information technology required to offer better service are putting further pressure on already narrow margins.
This means managed accounts, where a client hands over money to a private banker to invest it, are far from lucrative.
Khan has a few ways to buck the trend. He can enhance UBS’s already ample suite of services to lock in clients — and their descendants.
He could also try to convince the relatively risk-averse UBS to offer more loans and structured investments to those who entrust the bank with their cash. He could also push further into offering harder-to-access assets such as private debt or private equity. All promise higher returns and therefore fatter fees. But they also bring added risks.
If Khan is successful, he’ll be a strong contender to eventually take over from UBS Chief Executive Sergio Ermotti. But the bar has been raised. — Reuters
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