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UBS Group Choses Frankfurt as Operations Hub Post Brexit

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UBS Group AG (UBS - Free Report) has selected Germany’s financial hub Frankfurt over London as its new base for post-Brexit operations, per Bloomberg. Additionally, UBS plans to open offices in Madrid, Paris and Milan as part of its multi-location strategy in the European Union.

The company’s Chief Executive Officer, Sergio Ermotti, has been preparing to relocate operations to Frankfurt under assumptions of a no-deal Brexit. By assuming the worst-case scenario, the bank is likely to make provisions for higher costs than what might be incurred if a deal is struck.

The CEO made no mention of the number of employees that will be impacted by this move. However, the figure is expected to remain below 200, as expected previously.

Post Brexit Plans of Other Banks

HSBC Holdings (HSBC - Free Report) recently transferred the London branch’s ownership in its Polish and Irish subsidiaries to a unit in France, while Credit Suisse chose Frankfurt, Madrid and Luxembourg for shifting its investment banking jobs from Britain.

Further, Deutsche Bank (DB - Free Report) is planning to transfer large chunk of assets from its London base to Frankfurt headquarters post Brexit. Though no final decision on the size of asset to be moved is taken yet, Deutsche is likely to trim its balance sheet by about 75%.

While Citigroup already has majority of its EU employees outside of Britain, the bank still expects nearly 150 jobs to be affected in case of a no-deal Brexit. Moreover, JPMorgan has also initiated relocation plans for several dozen of employees at its U.K. offices, in a bid to ensure business continuity post Brexit.

Our Take

UBS Group’s restructuring initiatives along with cost-control efforts keep us encouraged of its growth prospects. However, its profitability continues to be challenged by negative interest rates in the domestic economy.

Shares of UBS Group have lost 7.1% on the NYSE over the past year, compared with the industry’s decline of 11.6%.

 

 

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

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