Roughly $800 million in losses in its Archegos dealings has put the brakes on UBS' lending offensive. The effort had been a key pillar of private bank co-head Iqbal Khan's strategy to kickstart the wealth manager.
Archegos hit Credit Suisse far harder – $5 billion in losses – but also sent shockwaves through UBS, which was hit in the first quarter and has flagged a minor hit for next as well. The larger Swiss bank is taming lending in its private bank as a result, CEO Ralph Hamers said at a recent brokerage conference according to a transcript compiled by Sentieo.
Nearly two years into the tenure of Iqbal Khan and Tom Naratil atop the $2.6 trillion wealth manager, UBS nearly shut the lending spigot entirely before reconsidering, according to «Advisorhub», which first reported Hamers' remarks.
Lending Key Tenet
A lending halt would have undermined Khan, a 45-year-old Swiss banker, and Naratil, 15 years his senior: both have backed lending as a key tenet of their «Elevate» growth strategy, especially among the U.S. wealthy which make for the largest part of the wider unit.
UBS' private bank lifted lending volume by $40 billion to $220 billion, «Neue Zuercher Zeitung» (behind paywall, in German) reported this week. The U.S. pitched in $5.5 billion of volume in the first quarter, according to the Swiss daily.
«Credit Khan» Playbook
Khan is deploying a page from his playbook at Credit Suisse, where he ran an international wealth arm from 2015 until 2019. The strategy earned him the nickname «Credit Khan,» the Swiss outlet reported.
UBS has always been the more hesitant lender than the smaller rival: it has leant against just 4.7 percent of its assets under management in the U.S., and 7.1 percent in the wider global wealth unit.
To be sure, UBS' losses from Archegos aren't directly linked to the private bank at all: the hedge fund was a prime brokerage client of the Swiss lender's investment bank. Hamers made clear that the shock however had reverberated through the bank, which «dissected» the events leading up to it.
