UBS Signs Memorandum Of Understanding With Banco Do Brasil
Zacks Investment Research | Sep 23, 2019 09:43PM ET
UBS Group AG (NYSE:UBS) and Banco Do Brasil SA formally announced that they have reached an understanding and are on track to sign a strategic agreement to form an investment banking joint venture.
The venture — which will have a global presence — would provide investment banking and institutional securities brokerage services in Brazil, and select countries in South America such as Argentina, Chile, Paraguay, Peru and Uruguay.
Though the terms and conditions of the partnership agreement are still under negotiation, UBS is likely to have a controlling stake with 50.01% ownership in order to avoid operational hurdles that generally arise in state-controlled companies, but governance might be shared.
Both the companies plan to make this partnership successful by utilizing their complementary strengths. The venture will have access to Banco do Brasil's corporate clients, and UBS' global execution and distribution capabilities.
In June 2019, UBS entered into a joint venture with Japan’s largest trust banking group, Sumitomo Mitsui Trust Holdings (“SMTH”), with a view of strengthening its position in Japan. Notably, through this venture, UBS will have access to SMTH’s pool of high net worth and ultra-high net worth clients in the country.
UBS’ strategic alliance to improve customer base and efforts to tap into opportunistic growth areas bode well. Also, the company is taking initiatives to control costs, which will aid bottom-line growth.
However, its net interest income remains under pressure due to persistent negative interest rates in the domestic economy. Also, the company’s involvement in several lawsuits and regulatory probes is likely to keep legal costs elevated.
Coming to price performance, the stock has lost 2% over the past three months compared with 3.8% decline of the Zacks Investment Research
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