UBS’ Chief Still Appears to Be in Buying Mood
UBS’ Peter Wuffli may turn what he calls his “wide-open radar screen” toward more potential takeover targets after buying a U.S. brokerage, a Brazilian bank and a futures broker in a two-month, $3.6-billion spending spree.
The 48-year-old chief executive of Europe’s biggest bank may tell investors today at a meeting in Zurich, Switzerland, that UBS will keep spending excess cash on acquisitions after generating a record 14 billion Swiss francs ($11.5 billion) in profit last year.
UBS wants to be “a growth company, not a utility,” Wuffli said in a May 16 presentation to investors, a week after agreeing to acquire Rio de Janeiro-based Banco Pactual for as much as $2.6 billion.
“Buying back shares is second best, so when we see opportunities to grow, to acquire, we will always favor these.”
Wuffli also agreed Thursday to buy ABN Amro Holding’s futures unit for $386 million, six weeks after reaching an accord to acquire the brokerage unit of Minneapolis-based Piper Jaffray Cos. for $575 million. The bank’s spending on takeovers in 2006 has been more than double the amount of the previous three years combined.
“They are clearly more aggressive,” said fund manager Jerome Schupp at Banque Syz in Geneva, which holds UBS shares.
UBS’ stock has risen 12% this year, outpacing Credit Suisse Group’s 4.9% gain and the 6.6% advance in the 77-member Bloomberg Europe Banks and Financial Services index. UBS’ market value of $127 billion is the fifth-largest among banks worldwide.
Wuffli is stepping up the pace of takeovers at a time when equity and commodity markets are stumbling. The Standard & Poor’s 500 index has declined 3.4% from a five-year high May 5. The price of copper has fallen 6.5% from a May 11 record.
“There is a risk they are buying at the top of the market,” said Florian Esterer, a fund manager at Swisscanto in Zurich, which manages about $41 billion in assets, including UBS shares.
That danger is offset by the relatively small price of the purchases and Wuffli’s experience integrating acquisitions, he said. The bank paid $500 million last year for 1.6% of Bank of China, the No. 2 lender in the Asian country.
The purchases are aimed at filling gaps identified by Wuffli. Buying ABN Amro’s futures unit will give Zurich-based UBS about $13 billion of customer accounts on deposit, putting it ahead of New York-based Goldman Sachs Group Inc. in the lucrative market for helping investors, including hedge funds, buy and sell contracts on commodities, stocks, interest rates and currencies.
Acquiring Pactual will make UBS the second-biggest arranger of stock sales in Latin America after Zurich-based Credit Suisse and add $18.6 billion of client funds, including $4.6 billion that Pactual manages for wealthy investors. The Piper Jaffray unit adds $52 billion in client assets in the U.S., where Wuffli had said the bank had a “somewhat insufficient position.”
“We have always made it clear that we do have a wide-open radar screen and that we do look consistently at acquisitions,” Wuffli told reporters in a conference call May 9.
Wuffli, a former McKinsey & Co. consultant, joined Swiss Bank Corp. as its finance chief in 1994. Swiss Bank merged with Union Bank of Switzerland in 1998, and a year later Wuffli became head of UBS’ global asset management business. He took over as president of UBS in 2001, and was named CEO in 2003.
UBS, the world’s largest money manager, has made 11 private banking takeovers outside Switzerland in the last three years, including the North American wealth management unit of Julius Baer Holding and Germany’s Sauerborn Trust.
The bank has added $101 billion in client assets through acquisitions since 2003, and managed $2.3 trillion of assets as of March 31, including money held in mutual funds and pension funds.
In private banking, “they are taking market share from competitors, and not just the small Swiss private banks,” said Matt Spick, an analyst at Deutsche Bank in London who rates UBS’ stock a “buy.” UBS may be capturing more fees from U.S. banks in the Middle East and Asia, where its “client-centered model may be more successful than the U.S. brokerage model,” he said.
UBS is aiming to bolster its wealth management unit, which accounted for 37% of the company’s first-quarter pretax banking profit, compared with 44% for investment banking.
