(Bloomberg) — UBS Group AG's more diversified wealth management exposure and business mix make it more attractive than its U.S. peer Morgan Stanley, according to analysts at JPMorgan Chase & Co.
While both firms are expected to generate around 60% of profits from asset-pooling businesses in 2027, JPMorgan analyst Kian Abouhossein said the Swiss bank has a better wealth management franchise than Morgan Stanley outside the US. It is helped by being heavily oriented towards Asia, which is seen as the “sweet spot”.
Moreover, UBS has a Swiss domestic bank, which is effectively a cash cow and an investment bank that consumes no more than 25% of the group's risk-weighted assets, compared 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 now the undisputed leading wealth manager in many parts of the world, but not in the US, the largest market for wealth management services. Chief Executive Sergio Ermotti has signaled that the US will be a key plank of its growth strategy.
The bank is competing for the lead in global wealth management, seeking to increase his rating on par with American rivals. UBS chairman Colm Kelleher – who previously served as president of Morgan Stanley – has said he thinks UBS should be valued as highly as some of its US peers.
Swiss loans
UBS has made rapid progress in integrating Credit Suisse since agreeing to buy the smaller rival in a spin-off a year ago. But still, buying comes with a number of possible difficulties from closing positions to managing legal obligations.
“Going forward, we do not expect UBS's downgrade versus Morgan Stanley to close, but we believe it could narrow,” JPMorgan analysts said in a note. Drivers for this include the earnings benefits of the Credit Suisse acquisition and the potential for higher returns on capital.
Read more: UBS signals majority closure of Credit Suisse Investment BankErmotti says UBS Catch-up in the US wealth market will take time