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UBS's Wealth Businesses Report Rise In Q1 Profits; Group Result Falls

Tom Burroughes

3 May 2016

today reported that its wealth management business (excluding Americas) delivered an adjusted profit before tax of SFr636 million ($669 million), a rise of SFr131 million from the prior quarter, despite the lowest transaction volumes recorded for a first quarter, and reflecting lower net expenses for provisions for litigation, regulatory and similar matters. For the entire firm, net profit attributable to shareholders fell, however. Shares in UBS fell 6.35 per cent mid-morning in London at SFr15.48 per share.

The Zurich-listed lender said this business division attracted "very strong" net new money of SFr15.5 billion, driven by net inflows from all regions, particularly Asia-Pacific, and the ultra high net worth segment. The adjusted net margin on invested assets increased by five basis points to 27 basis points. During the reporting period, UBS opened a new Shanghai branch as part of its onshore expansion in China.  

Wealth Management Americas, meanwhile, recorded an adjusted profit before tax of $245 million compared with $63 million in the previous quarter, reflecting lower net expenses for provisions for litigation, regulatory and similar matters.

This business segment logged net new money of $13.6 billion; this reflected net inflows predominantly from newly recruited advisors as well as from financial advisors employed with UBS for more than one year. WMA financial advisors continued to be the most productive among peers with an average $147 million of invested assets and $1.1 million revenue per advisor, it said.

"Negative market performance, substantial volatility, as well as underlying macroeconomic and geopolitical uncertainty, led to more pronounced client risk aversion and abnormally low transaction volumes in the first quarter," the bank said.

"Some of these factors have stabilised recently, but the underlying macroeconomic challenges and geopolitical risks highlighted previously continue to contribute to client risk aversion and are unlikely to be resolved in the foreseeable future. Low interest rates, and the relative strength of the Swiss franc, particularly against the euro, continue to present headwinds," it added.

Separately, and confirming some media reports, the bank has set out plans to restructure its wealth management division.

A note sent to staff talks of the creation of new division and leaner operations. A report in the Financial Times quotes wealth management CEO Juerg Zeltner as saying: “What is good enough today is not going to be good enough tomorrow."

Zeltner said reducing complexity will lead to “some reduction in personnel, predominantly in non-client facing areas”. Annual cost savings will be “hundreds of millions”, the report added. 

Other segments
Personal and corporate banking posted an adjusted profit before tax of SFr422 million compared with SFr396 million in the prior quarter, despite continued challenges arising from negative interest rates and the slowdown in economic activity. The annualised net new business volume growth rate for the personal banking business increased to 4.9 per cent from 0.6 per cent, the highest growth rate since the first quarter of 2012.

Asset management delivered an adjusted profit before tax of SFr110 million, down from SFr153 million in the prior quarter, partly due to lower performance fees in equities, multi asset and other areas. Excluding money market flows, net new money outflows were SFr5.9 billion including a SFr7.2 billion pricing-related outflow from one client, and SFr3.8 billion of outflows driven by client liquidity needs, both from lower-margin passive products.  

The investment bank posted an adjusted profit before tax of SFr370 million compared with SFr223 million in the prior quarter, maintaining prudent risk, cost and resource management. The investment bank's fully applied risk-weighted assets (RWA) were stable at SFr63 billion.

Group peformance
In what it called a "challenging environment", UBS said that across all divisions, it reported an adjusted operating profit before tax of SFr1.366 billion, with positive contributions from all business divisions and regions. Net profit attributable to shareholders was SFr707 million, falling from SFr1.977 billion a year earlier. Group annualised adjusted return on tangible equity was 8.5 per cent. UBS's combined wealth management businesses attracted strong net new money totalling SFr29 billion, the highest since 2008.

The bank had a fully applied CET1 capital ratio of 14.0 per cent.