The restructuring process at the wealth management business of UBS has arrived at its U.S. subsidiary. The bank's top management aims to save money by moving the units closer together.

Juerg Zeltner's next big project was not intended for publication. But an internal document written by the head of UBS' Wealth Management division founds its way to the media.

UBS is planning to reorganize its core business and to save several hundred million francs, according to the paper. To achieve savings of that magnitude, UBS Wealth Management will have to cut jobs – and the Swiss media concluded that hundreds of jobs were in danger of being eliminated in Switzerland.

Cuts Around the Globe

But it won't stop at that: not only will UBS reduce its headcount in Switzerland, but equally so at the surrounding country units, in emerging markets and in Asia. Zeltner told the «Financial Times» (article behind paywall) that he was in talks with Tom Naratil, head of Wealth Management Americas, a unit traditionally kept separate at Switzerland's No.1 bank.

Zeltner and Naratil are looking for options to cooperate more closely in the provision of customers, in IT and the procurement of services. The newspaper reported that the discussions didn't remain at a theoretical surface but will lead to cost savings amounting to millions of francs.

Independent Kingdoms

A closer cooperation between the wealth management units at UBS may surprise. Each of units has about $1 trillion in assets under management and is one of the world's largest wealth managers. And both units have been kept separate, pretty much like independent kingdoms.

Still, the writing has been on the wall and a softening of the hitherto ironclad principle of separation becoming more and more likely. In April, rumors had it that the U.S. wealth management business was to cooperate with the Americas division in the back- and middle-offices. The introduction of a chief investment office for both divisions was seen as an indicator of what was likely to come.

The rumors were part of a discussion about how the bank intended to cut costs – for instance by ending a damaging and counterproductive competition on costs.

Pressure Is on

The intentions are slowly becoming clearer as the pressure is mounting on the management. UBS had a worse-than-expected first quarter – which included wealth management.

The pressure is particularly strong in the U.S. where profitability has long been sub-standard. The business is relying on brokers, a model which creates high wage costs and thus weighs on the cost-income-ratio (CIR), an important measure in banking.

UBS Americas had a CIR of 87 percent in the first quarter, which compares with Zeltner's 66 percent. Insiders say that wealth management in Switzerland has a CIR of clearly less than 50 percent.

The management seems to put more emphasis on these comparisons than it used to – with a telltale sign being the replacement of Robert McCann in November. His replacement, Naratil, has his work cut out, as finews.ch suggested at the time.

Demand on U.S.: Deliver a Proper Return

This conclusion would seem to have been born out by facts. The division, which most recently earned 13 cents from $1 turnover will have to deliver proper money soon. And the bank is clearly intent on cutting to size the independence of the U.S. business – the envy of a great many Swiss UBS banker.

The Americas will be moved closer to the Swiss headquarters and after years of a perceived “Americanization”, UBS may be heading towards a period of more “Swissness”.