UBS Chief Touts Netflix, Spotify in Tech Vision for Banking
(Bloomberg) -- UBS Group AG’s Chief Executive Officer Ralph Hamers is taking inspiration from tech companies Netflix Inc. and Spotify Technology SA, as he works out plans to digitize the bank that will include job cuts at the world’s largest wealth manager.
Hamers, six months into the role, is taking a deep look at where he can cut costs and digitize operations, including in the high-touch business of serving the world’s wealthiest people. He wants to use artificial intelligence to target how to sell more products to the world’s wealthy and rethink what markets the bank operates in, with a heavy focus on Asia.
“Think about how you would interact with Netflix, think about how you interact with the Spotify service you use every day and you do it without even thinking about it and you get a recommendation that you actually think is relevant to you,” Hamers said on a conference call on Tuesday. “Now if you make our content available in that way, we can differentiate ourselves.”
Hamers was picked as a surprise choice by chairman Axel Weber to lead UBS about a year ago, bringing a reputation for digitization and admiration for Silicon Valley while he was at ING Groep NV, though lacking experience in wealth management. He’s not the first banker to embrace digitization in banking -- and there are questions about how much automation rich clients want -- though Hamers can point to successes such as adding millions of mobile clients at his former employer.
The implementation of new initiatives are expected to provide $1 billion in gross saving per year by 2023, though so far the bank has been short on concrete details. UBS is also taking a restructuring charge of $300 million in the second quarter related to the strategy. A broader strategic update and new financial targets will be disclosed with the full-year results for 2021.
The plans will start with job cuts as the restructuring charge relates directly to layoffs across geographies and business divisions. The bank declined to specify how many jobs would be eliminated. During an analyst call Tuesday, Hamers used phrases like “culture eats strategy for breakfast”, “fly-wheel effect”, and “agile” and talked extensively about the bank’s purpose to “re-imagine the power of investing.” He starved analysts of any concrete numbers to attach to his plans.
“The new strategy outlined by CEO Hamers was full of buzzwords,” said Andrew Coombs, a bank analyst with Citigroup Inc, in a research note on Tuesday. “But lacked detail and seemed to indicate any changes will only be around the edges, rather than any big strategic shift.”
As part of his digital plans, Hamers has replaced the chief operating officer position with that of chief digital and information officer. UBS named Mike Dargan to the role, joining the group executive board on May 1. Dargan has been head of group technology at the Zurich-based bank since joining in 2016. The promotion brings the focus on technology onto the executive management team for the first time, apart from Hamers himself.
Read more: Hamers Touting Artificial Intelligence Gives Taste of UBS Future
Most tangibly, UBS said that it planned to invest heavily in the U.S. business as well as in Asia, with a particular focus on China. Hamers is also changing the way the bank spends on technology projects, to a more flexible quarterly allocation from fixed funding on a yearly basis. The bank spends approximately $3.5 billion per year on technology.
Hamers also wants to increase the speed at which the bank responds to client requests and implement an “agile” working model to replace the top-down hierarchical current structure. He wants the bank to use more robotics and data processing, and a client engagement that includes an interaction with a tech team.
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