The UBS wealth management delivered a strong third-quarter result. And yet, it’s new co-head, Iqbal Khan, will still have plenty of challenges to tackle.

Wealth management has delivered: The bank’s key unit exceeded analysts’ expectations for net income on higher revenues and an improved pretax profit.

Sergio Ermotti and his new co-head of wealth management, Iqbal Khan, will have been pleased with the numbers reported on Tuesday. Expectations are high that Iqbal Khan can top the results Martin Blessing had delivered, after joining from Credit Suisse.

Getting Clients to Trade Over the Summer

Relationship managers clearly succeeded in getting clients to trade actively over the summer. Interest income and fee revenues for recurring services also exceeded expectations. UBS didn’t however match last-year’s result in the latter segment, despite a surge in invested assets.

The world’s largest wealth manager is still lagging the performance of arch-rival Credit Suisse in some areas, despite the fact that earnings in the third quarter had exceeded expectations. For instance, UBS is generating less profit on assets under management that Credit Suisse.

Worries Ahead

One of the reasons, why Credit Suisse is doing better than UBS is that Khan’s previous employer put a higher emphasis on loans granted to rich clients. Time will tell whether Khan will be able to emulate his success at UBS.

UBS today warned that negative interest rates lowered net interest income going forward. This will hamper any attempts by Khan to boost the performance outside the Americas region.

U.S. Laggards

Trading income traditionally generates the most volatile share of revenue in wealth management, so persistent positive results aren’t likely available to sustain Khan’s unit while he reshuffles its business.

If Khan aims to increase margins and to reach a cost-income ratio of 70 percent (currently running at 77.7 percent), he will have to cut costs. The main issue in this respect is down to the U.S. business, where Naratil signs responsible for a relationship manager team that has just over half of total assets under management and two thirds of all relationship managers.

All Eyes Are on Him

UBS wants to get the U.S. wealth management to focus more strongly on very rich clients to get the U.S. business more strongly in tune with the rest of the world. Naratil has already applied the break on hiring new relationship managers in the U.S., which is keeping costs under control but risks the inflow of assets.

Khan meanwhile will feel all eyes him, given that he is the crown prince behind Ermotti. The coming two years will show whether he can get the bank to shine.