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UBS Group to Reduce Costs With China Digital Bank License

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UBS Group AG (UBS - Free Report) seeks to offer digital banking services to reduce operational costs and boost growth. The news was reported by South China Morning Post.

However, the bank is still contemplating on whether to apply for a digital bank license in China. Per Edmund Koh, the head of UBS Group’s operations in the Asia Pacific, China’s guidelines, with respect to digital banking, might be rolled out by this June or July.

Koh believes that the move could help the company to expand its customer base at lower costs. He revealed that acquisition of a wealth-management client at present costs $25,000, while with the license the cost could come down to $60. Further, in two months, Koh aims to raise the customer base in Asia to 200,000 from 30,000.

Upon the successful grant of UBS Group’s application for the license, it will offer services alongside China giants such as Tencent Holdings’ (TCEHY - Free Report) and Alibaba Group Holding’s (BABA - Free Report) banking units.

Per the article, China regulators are mulling to make new guidelines stricter by the way of requiring higher reporting standards, capital requirements and clarified regulatory reporting lines. Thus, costs of running a digital financial operation are expected to increase.

UBS Group mulls China to be an ideal place for launching a digital banking platform due to its expertise in artificial intelligence. Further, the country is known to be the hub of evolving financial services and risk management businesses. Also, Koh is planning to make the platform global.

Our Take

UBS Group continues to execute restructuring initiatives to free resources and invest in profitable areas to better serve clients. However, the top line has remained under pressure due to persistent negative interest rates in the domestic economy.

UBS Group has lost 19.7% over the past six months on the NYSE compared with the 38.1% decline of the industry it belongs to.

 

 

Currently, the company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A better-ranked stock in the same space is Virtu Financial (VIRT - Free Report) . The Zacks Consensus Estimate for 2020 earnings has been witnessing upward revisions in the past 30 days. Also, its share price has increased 45% in the past six months.

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