UBS Rejigs Targets for Second Time as Ermotti Seeks Share Boost

(Bloomberg) -- UBS Group Chief Executive Officer Sergio Ermotti rejigged the bank’s key financial targets for the second time this year after investors fretted over the lender’s stock performance.

The new targets -- focused on the newly combined private banking businesses and the lender’s cost to income ratio -- include expectations for net new money growth of between 2 and 4 percent and overall revenue growth at the same pace as GDP. Costs will come in higher than the bank had been previously expecting next year.

Here are some of the highlights:

• Net new money growth of 2-4 percent per year and growth of at least 3 percent by 2021
• Adjusted cost to income ratio of about 72% by 2021
• Global wealth management to deliver at higher end of 10-15 percent profit before tax growth range

Ermotti is under pressure to show investors how the bank can reap greater profits from a merger of its two wealth management businesses earlier this year and revive a lackluster share price. It’s seeking to win over American billionaires by boosting recruitment in the U.S. and further cross-selling between its U.S. and Asian operations. But as competitors start to close in, some investors have approached the bank to ask about performance

The lender rejigged financial targets this year after investors argued the CEO should do more to improve returns. Ermotti committed to buying back as much as 2 billion francs of stock, targeting growth in net new money that at the time was also lower than some previous estimates and pledging to meet a cost-to-income ratio of under 75 percent for the group between 2018 and 2020. It also plans to pursue acquisitions of wealth management assets more aggressively, people familiar with the matter said earlier this year.

While seeking to convince investors about the potential of the wealth management business, Ermotti is contending with the sudden departure of investment banking head and top dealmaker Andrea Orcel, who is leaving the lender to become chief executive officer of Banco Santander SA. The investment bank had outperformed other units in recent quarters, with the bank saying strategy is set to remain unchanged under newly minted co-heads Piero Novelli and Rob Karofsky.

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