ubs consulting project

7/24/2019 UBS Consulting Project

1/32

Team Innovation


2/32

UBS & Commercial Banking Industr

Throughout this presentation, you will get to know more about Commercial Banking Induin the industry, in particular, UBS Group.

Both industry and firm le!el analyses with "i!e "orce #nalysis, #d!anced "i!e "orce #na$esourced Based %iew, and strategy analysis.

"irm le!el analysis on comparison of UBS with leader firm of the industry, &ells "argo, oused.

Identify both industry and firm le!el issues and pro!ide corporate strategic recommendati


3/32

Commercial Banking Industry

Banks that pro!ide financial ser!ices to retail and business custthe United States. The ser!ices are performed by accepting depcustomers and pro!iding customers commercial, industrial, andloans.

IndustryRevenueUS$684.4

billion

IndustryEmploymen

t1,564,368

IndustryGrowth Rate+6.0% predicted

2015-2020

CoJPM

'!n


4/32

Client Firm - UBS Group AG"orbes' $anked ()* on &orld+s Biggest Banks, (- on &orld+s BiggeCompanies

Ser!ices / In!estment banking, asset management, wealth managemenpri!ate, corporate, institutional clients worldwide.

articularly recogni0ed in sponsoring sporting e!ents around the worldasset management.

Incorporated 1arket Cap 2)*345 ( of 6mployees2)*345

7et I

Canton of 9urich,Swit0erland

US:8. Billion ;*,344 C


5/32

Industry Leader - Wells Fargo

"orbes' (; on &orld+s =argest Banks

#nnounced to eliminate foreign transaction fees on all busincredit access card transactions made outside the U.S. to bene

businesses in the U.S. with desire to e>pand globally

"ounded 1arket Cap 2)*345 ( of 6mployees2)*345 7et I

7ew ?ork City, 3@4) :);8 Billion )4,*** :)


6/32

Industry Financial Analysis &in!nci!l *n!li '!ed on /etrn on it /!

Firms JPMorgan Chase

Citigroup WellsFargo

MorganStanley

IndustrAverag

NetIncome(USD)

21,276million

7,300million

23,057million

3,667million

TotalStoc!ol"ers# $%&it'

(USD)

232,065million

210,500million

15,262million

70,00million

*et&rn on$%&it' (+)

3 347 1245 517 762


7/32


8/32

Analysis of Financial erformance -UBS Group

Return onEquity

9%

Eono!iAverage

"#$&%

IndustryIn'uene

"$9(%

StrategyIn'uene

)$*%

Co!pany+sPro,ta-ility

*$)(%

IndustryAverage

Industry AverageROE

EconomicAverage ROE

UBS AverageROE

Industry Influence Str

7.6! "! 6.7! #$.%&! #'.'


9/32

Analysis of Financial erformance -Wells Fargo

Return onEquity

9%

Eono!i

Average

"#$&

%

Industry

In'uene

.$&%

Strategy

In'uene

#($./%

Co!pany+s

Pro,ta-ility

*$)(%

Industry

Average

Industry AverageROE

EconomicAverage ROE

(ells )argoAverage ROE

Industry Influence St

7.6! "! $.*+! #$.%&! *.


10/32

IndustryRivalrySuppliers

0uyers

Potential Entry

Su-stituteso!er of Suppliersower of Suppliers'


11/32

$ecession and economic downturn

The )**@ recession and preceding bubble pop left the commercial banking industry in shambles,to the point where the go!ernment had to bail them out

=oss of bank products to Brokerages and insurance firms?ou are seeing credit cards from retail stores, loans from mutual funds and so on and so forth.The monopoly banks had on mortgages and #T1s is not safe either

Tight go!ernment regulation

Changing capital and liuidity mandates, compliance costs and risk management costs ha!eforced the industry to change in unprecedented ways

rend n!ice7!ple

9p!ct on 5 &orce

'er Po:er

/i;!lr

Sbtitte

'er Po:er

Potenti!l ntr

ot

< =oss of bank products to other industries

ther financial ser!ice institutions ha!e coJ opted commercial

banking ser!ices

Tightened go!ernment regulations

The go!ernment has come down hard on

commercial banks in the wake of recession

Advanced 5 Forces Analysis (I)What trends 1 hanges are li2ely to a3et industry stru

1 industry 4

Module #2: Industry Analysis


12/32

= otential entry' "ares better than industry a!erage dueto its international presence and recognition

= Suppliers' UBS ser!ices high net worth indi!iduals,

and as such supplier power is higher than industrya!erage

= Buyers' Buyer power would also be higher, since thosepurchasing their ser!ices ha!e the time and resourcesto shop around

= $i!alry' It is e>posed to neither a lesser or greateramount of this force. Industry forces are !ery similar inCB due to how common the corporate structure is

= Substitutes' Threat of substitutes is neither lesser orgreater. #lternati!es to commercial banking is limitedfor the indi!idual in!estor

Module #2: Industry Analysis

IndustryRivalry

Suppliers

PotentiaEntry

Substitut

Advanced 5 Forces Analysis (II)

,ean ,ar-a/

Industry 1 7*2&&6

UBS 1 7%2%%7


13/32

>&ells "argo pursues a Broad 1arket and Cost =eadership Strategy>Customer Centric, top employer, strong capital structure

A'erage firmL> Aey dri!er of &illingness to pay is access to ser!ices and trustworthiness of bank 2byproduct of being a la> Cost dri!er' low enough interest on deposits

Wells Fargo L)ey dri'er of Willingness to ay*CrossJsellingJ the process of offering customers the products and ser!ices theythem, to help them succeed financially.$easons it gi!es a competiti!e ad!antage'

3. It+s cheaper than new customer acuisition' It costs a bank much more to acuire customers than to sell ). It impro!es customer retention' CrossJselling means a customer gets a number of ser!ices from you. Th

deeper customer relationship.-. It increases re!enue per customer' 1ore crossJselling means more re!enue from the same customer.

)ey dri'er of Cost* lowest cost 2number one5 of deposits among competition8. Interest on interestJbearing deposits low4. demand deposits free

Analysis of Leader Firm+s Strategy & rofi


14/32

leader firm+s strategic c#oices , enable to achie!e higherJthanJa!erage profits in its industry

=eading market share in mortgage and auto loansM strong in other retail and commercial

Di!ersified re!enue sourcesNstrong in interest and nonJinterest income =arge, low cost deposit base Strong risk cultureNstrengthening it e!en more 6>perienced management team and satisfied employees Strong returns !ersus peers with lower !olatility =ower risk profile than large peers Broader distribution, scale, and product set than regional banks

"angi(le resources ,&ells"argo is the best capitali0ed bank among its competition, only larg

asides from Bank of #merica to not ha!e a capital shortfall to meet the regulatory le!erage ratioreuirement of 4K

Intangi(le ,Strong brand recognition, e>ceptional client loyalty and retention, low employee L belie!es people are a competiti!e ad!antage source



15/32

Firm-Le'el Analysis II.

UBS Strategic Acti'ity /ap* 0arro! /arket and 1ifferentiation


16/32

>UBS Strategic osition* 0arro! /arket and 1ifferentiation>)ey 1ri'ers of W" in t#e industry*

Bank trustworthiness ercei!ed uality of customer ser!ice $eturn on In!estment

>)ey 1ri'ers of Cost in t#e industry* Interest rates and cost to deposit Consumer credit scores Industry regulation Underde!eloped technology infrastructure

Firm-Le'el Analysis II.Analy5e your lient ,r!+s strategy 1 pro,ts


17/32

Comparison of W" and Cost


18/32

Commercial Banking ositioning /ap


19/32

UBS W" 1ri'ing Acti'ities* UBS ?oung rofessional rograms allow

young talent to be e>tensi!ely trained, enablingthem to pro!ide high uality ser!ices

Di!erse globally allows more comprehensi!efinancial ad!ising

Strong asset manager

In )*3) culled :-** million in risky assets,

reducing balance sheet risk

ne of the highest re!enue per financialad!isors in the industry

Firm-Le'el Analysis II.Analy2e your client firm+s strategy & profits

UBS Cost 1ri'ing Acti'ities* creation of entities that are sp

lower capital reuirements

1ultiple fraud and ta> e!asio

Securities unit for UBS was shad a lower margin and wealunit was increased, which ha

Fi L l A l i II.


20/32

W#y UBS+ W" and Cost is 1ifferent*

&illingness to pay for UBS is not as high because they appeal to consumers

on a rational le!el, without imparting the emotional benefits that wouldincrease business trustworthiness and thus increase &T to le!els thatwould be on par with &ells "argo

UBS hasn+t achie!ed the low interest rates on interest bearing deposits that&ells "argo has, so their costs are higher

UBS has had multiple in!estigations and fines le!ied against them for

regulatory infractions including but not limited to ta> e!asion,discrimination, money laundering and currency manipulation/ This affects costs because of the regulatory fines and &T because it

decreases consumer perception of trustworthiness

Firm-Le'el Analysis II.Analy5e your lient ,r!+s strategy 1 pro,ts


21/32

3I4 Frame!ork5o! t#e leader firm+s resources affect its profita(ility ,Strong company leadership with

retention fosters a culture and en!ironment where customers also loyally stay by the firm, and

name

Resources Best capitalized Strong brand recognition Client loyalty

Is it Valuable (V) !es !es !es

Is it Rare (R) !es" only Bo# $as been able to not $ave

$ad no capital s$ort%all to meetregulatory leverage ratio re&uirement o%'

6es7 pro'ides a !ide'ariety of ser'ices t#atmost ot#er commercial(anks do not pro'ideunder one roof

6es7 most (anks do noto(tain #ig# employeeloyalty and t#ereforeclients are not as loyal

Is it *i%%icult to Imitate(I)

!es" i% competing %irms raise capital"t$eir +,S and return on e&uity will liely

%all- T$is will lower t$eir valuation- Incontrast" i% t$ey don.t raise capital" t$eir

%uture growt$ will liely be limited-

/o" ot$er %irms $aveestablis$ed strong brandawareness

/o" it is possible tocreate customer reliancevia programs andbene%its

Is %irm organized tocapture value?

6es7 (ut needs to !ork on certainfields suc# as tec#nologyinfrastructure de'elopment as t#is !ill#elp !it# reducing costs and increaseprofita(ility

!es !es



22/32

3I4 Frame!ork5o! t#e client firm+s resources affect its profita(ility ,UBS+ $esources only pro!ide th

competiti!e ad!antage gi!en that none of them meet the full %$I criteria

Resources Capital Competency !oung ,ro%essionals,rogram

+2pert 1inancial#dvising

Is it Valuable (V) yes yes yes

Is it Rare (R) /o" 3t$er bans $ave nowledge ande2pertise to claim capital competency

!es" Brings in educatedtalent

/o" not unusual to $ave&uality %inancialadvisors on sta%%

Is it *i%%icult to Imitate(I)

/o /o" +asy to set up t$eseinds o% programs

/o

Is %irm organized to

capture value?/o !es !es

Analysis of Client Firm+s Strategy & rofit


23/32

5ori2ontal Scope

Business di'ision Segment roducts8Ser'ices

Banking in

Swit0erland

Indi!idual,

Corporate and

Institutional

clients

&ealth 1anagement, $etail Banking,

Corporate Institutions clients' ayment transac

international transactions, financing, corporate fin

in!estment, foundation, succession retirement pro

&ealth1anagement in

the US#

Indi!iduals andsmall businesses

Security backed lending, UBS mortgage, UBS credebit cards, education planning, retirement plans,

planning


24/32

5ori2ontal Scope


25/32

3ertical ScopeScope is mi>ed gi!en the high power of suppliers and the way the commercial bank is

able to utili0e these deposits to pro!ide loans and other ser!ices to customers


26/32

Assessment of Strategic Issues*Industry4Level

)ey c#allenges affecting industry profits*/Interest rates and cost of deposit

/Underde!eloped technology infrastructure

=UBS can*?In!est in technology infrastructure or !ertically integrate

infrastructure pro!iders?Specifically in!est in eJbanking and mJbanking

?1odify capital structure to allow for lower interest rates adeposits


27/32

Assessment of Strategic Issues II.* 1irm Leve

=)ey c#allenges affecting firm profits*?$egulatory fines

?ercei!ed trustworthiness of bank?=ack of market penetration in certain areas

=UBS can*?$efrain from future illegal actions

?Currently under in!estigation for ta> e!asion in multiple counrecei!ed many fines for regulatory infractions

?6ngage in better customer relations?This will impro!e how trustworthy consumers percei!e UBS athem more inclined to in!est or pay more, raising &T and prof

?1arket more to underpenetrated markets, such as the #me

Assessment of Strategic Iss es* Corporate


28/32

= )ey #ori2ontal scope issues? Smaller range of financial ser!ices compared to competitor

? =ess focus on employee and customer incenti!e programs i#mericasO#sia

= )ey 'ertical scope issues? Underde!eloped technological infrastructure J competitors

integrated to online mobile banking

? Use of outside research firm $ep$isk to run risk analysis oinitiati!es

Assessment of Strategic Issues*CorporateStrategy


29/32

Impro'e consumer trust in t#e company/Consumer trust or perception of trustworthiness is one of the key d

the industry/Wells Fargo is currently more trusted than UBS so increasing trust

make UBS more competitive/This could e accomplished through consistent returns! marketing

service training

$%pand financial ser'ices offerings/UBS is currently very reliant on its relatively small range of comm/By e"panding their services! UBS would e ale to strengthen their

activity# offering e"pert financial advice/UBS would also e ale to increase WTP y increasing consumer p

value and reliaility with a wide range of financial services

4ur ecommendations*Increasing 0T,


30/32

Become more compliant !it# regulations/UBS has incurred millions of dollars in regulatory penalties

/They could reduce overall costs y making an effort to ecome moregulations

/This would then increase profit! as well as overall consumer percep

company and rand/$n doing so! UBS should institute usiness ethics training for all em

1e'elop o!n tec#nological infrastructure/UBS currently licenses software from an outside company/This software%s infrastructure is developmentally ehind/By developing their own software! UBS would e ale to reduce co

providing more value to their consumers

4ur ecommendations**ecreasing Costs


31/32

Bibliograp$y5Pur StrategyQ, &ells "argo, accessed 7o!ember )nd, )*34.https#&&www'wellsfargo'com&aout&corporate&vision(and(values&our(strategy&

)*ur Si" Priorities+! &ells "argo, accessed 7o!ember )nd, )*34.https'OOwww.wellsfargo.comOaboutOcorporateO!isionJandJ!aluesOourJprioritiesO

Saul ere0, P&hy &ells "argo+s strategy is different from other banks,Q. ,arket -ealist! ctober Rth, )*38.http#&&marketrealist'com&./01&0/&why(wells(fargo(is(leveraging(technology(to(cut(costs&

#lden, &illiam. )*38. Signs f rogress In UBS In!estment Bank !erhaul. 2ealook.http'OOdealbook.nytimes.comO)*38O*)O*8OsignsJofJprogressJinJubsJin!estmentJbankJo!erhaulOr* .

BBC 7ews,. )*34. UBS Confirms "resh Ta> 6!asion robe In The US J BBC 7ews. http'OOwww.bbc.comOnewsObusinessJ-3-8R

Bloomberg.com,. )*3). Swiss #ttorney General pens Criminal In!estigation f UBS.http'OOwww.bloomberg.comOnewsOarticlesO)*3)J*@J-3OswissJattorneyJgeneralJopensJcriminalJin!estigationJofJubs .

Bloomberg.com,. )*34. Blackrock+S


32/32

Bibliograp$y cont-

&etfeet,. Industry !er!iew' Commercial Banking J &etfeet.Com. 7.p., )*34. &eb. - 7o!. )*34.

$euters,. )*34. UBS To ay :484 1ln !er "ore> Scandal, $i!als #wait "ate.

http'OOwww.reuters.comOarticleO)*34O*4O)*ObanksJfore>JsettlementJidUS=37*?B*"9)*34*4)* .

Settlements, UBS. )*34. UBS Sets #side :) Billion "or Currency $igging #nd Ta> 6!asion Settlements. Business $nsider.http'OOwww.businessinsider.comOubsJsetsJasideJ)JbillionJforJcurrencyJriggingJandJta>Je!asionJsettlementsJ)*38J3* .

Ubs.com,. )*34. ur Strategy V UBS Global Topics. https'OOwww.ubs.comOglobalOenOaboutubsOaboutusOstrategy.html.

Schwar0, EWrgen et al. "i!e Trends Disrupting The Corporate Banking =andscape. www'cgperspectives'com . 7.p., )*34. &eb. - 7o!

"inancials.morningstar.com,. UBS' UBS Group #G Top Competitors #nd eers. 7.p., )*34. &eb. - 7o!. )*34.

UBS.com. )*34. XUBS Group #G )*38 #nnual $eport+. 7.., )*34. &eb. - 7o!. )*34.

https'OOwww.ubs.comOcontentOdamOstaticOepaperOinde>.htmlidc8f8@)-@

IBIS &orld. )*34. XIndustry $eport' Commercial Banking Industry in the US+.http'OOclients3.ibisworld.com.e0pro>y.bu.eduOreportsOusOindustryOdefault.asp>entid3)@@

=iyan Chen. X)*34 Global )***' The &orld+s =argest Banks+.Fores'com. )*34. &eb. - 7o!. )*34. http'OOwww.forbes.comOsitesOliya

globalJ)***JtheJworldsJlargestJbanksO

E1organChase.com. )*34. XE1organ Chase )*38 #nnual $eport+. &eb. - 7o!. )*34.

Citigroup.com,. Citi V )*38 #nnual $eport. 7.p., )*34. &eb. - 7o!. )*34.

&ellsfargo.com. )*34. X&ells "argo )*38 #nnual $eport+. 7.p., )*34. &eb. - 7o!. )*34.

Sites.google.com,. orters 4 "orces #nd The Banking Industry J The Banking Industry #nd The Internet. 7.p., )*34. &eb. - 7o!. )*3
http://www.reuters.com/article/2015/05/20/banks-forex-settlement-idUSL1N0YB0FZ20150520http://www.reuters.com/article/2015/05/20/banks-forex-settlement-idUSL1N0YB0FZ20150520http://www.businessinsider.com/ubs-sets-aside-2-billion-for-currency-rigging-and-tax-evasion-settlements-2014-10http://www.businessinsider.com/ubs-sets-aside-2-billion-for-currency-rigging-and-tax-evasion-settlements-2014-10https://www.ubs.com/global/en/about_ubs/about_us/strategy.htmlhttps://www.ubs.com/global/en/about_ubs/about_us/strategy.htmlhttps://www.ubs.com/content/dam/static/epaper/index.html?id=c4f48238http://clients1.ibisworld.com.ezproxy.bu.edu/reports/us/industry/default.aspx?entid=1288http://clients1.ibisworld.com.ezproxy.bu.edu/reports/us/industry/default.aspx?entid=1288https://www.ubs.com/content/dam/static/epaper/index.html?id=c4f48238https://www.ubs.com/global/en/about_ubs/about_us/strategy.htmlhttp://www.businessinsider.com/ubs-sets-aside-2-billion-for-currency-rigging-and-tax-evasion-settlements-2014-10http://www.reuters.com/article/2015/05/20/banks-forex-settlement-idUSL1N0YB0FZ20150520

ubs consulting project

Documents