This Superbank's Stock Has Rallied 15%

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Want your bank's stock price to jump? Try a little more wealth management and a little less investment banking. At least that's what any bank CEOs and investors watching UBS (NYSE: UBS  ) should be thinking.

Since the Swiss superbank announced a radical restructuring a little over two weeks ago -- one that will leave its struggling investment bank in a supporting role to its market-leading wealth-management unit -- the stock price has risen by more than 15%. 

The club is open
Anyone watching the banking sector over the past few years has likely taken note of the shift from the highly profitable but highly flammable profit generators of pre-financial crash days -- like investment banking -- to the less profitable but infinitely more stable lines of business rising to the top of the heap since 2008 -- like wealth management. Stricter regulation, both domestic and international, have forced banks to find safer ways to make money.

Part of the UBS club of big banks focusing more of their attention on wealth management are:

  • Morgan Stanley (NYSE: MS  ) , which recently began the total buyout of Morgan Stanley Smith Barney from Citigroup (NYSE: C  ) , and which it has already renamed Morgan Stanley Wealth Management.
  • Goldman Sachs (NYSE: GS  ) , which recently got into the private-wealth management game, as well -- opening a bank-within-a-bank this year to cater to its wealthiest clients.  
  • And Bank of America (NYSE: BAC  ) just published its Insights on Wealth and Worth, it's annual survey -- and barely disguised pitch -- for its own wealth management division, U.S. trust. 

Step right up, folks, everyone's a winner
According to Financial Times, UBS's wealth and asset management units are achieving a 26% return on allocated equity, a number the investment bank can't come close to matching. As such, there's little mystery regarding CEO Sergio Ermotti's bold move. And as evidenced by the 15% jump, investors overwhelmingly approve.

And why shouldn't they? When a bank goes back to basics, and investors can get their heads around what's going on inside of it, it makes for a safer investment. Non-investors benefit, too. Banks focused on traditional ways of making money are less likely to blow up than they would under the strain of the investment-bank antics that dominated Wall Street since the deregulation of the 80s and 90s. Safer, more traditional banks make for better investments and a better economy.

Thanks for reading, and for thinking. Interested in learning more about what Bank of America is up to? We've just published an in-depth report on the superbank: one that thoroughly detail B of A's prospects and highlights three reasons to buy and three reasons to sell. Just click here for full access.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2110355, ~/Articles/ArticleHandler.aspx, 10/22/2016 9:44:20 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:00 PM
BAC $16.67 Up +0.11 +0.66%
Bank of America CAPS Rating: ****
C $49.57 Down -0.01 -0.02%
Citigroup CAPS Rating: ***
GS $174.67 Up +0.16 +0.09%
Goldman Sachs CAPS Rating: ***
MS $33.44 Up +0.54 +1.64%
Morgan Stanley CAPS Rating: ****
UBS $13.67 Up +0.03 +0.22%
UBS AG (USA) CAPS Rating: **