UBS Stops the Bleeding, Adds Retail Client Assets
sponsored by:
Mr. Fix It, Bob McCann
Clients assets at UBS Wealth Management Americas outpaced withdrawals in its latest third-quarter results, a singular achievement last reported by the brokerage unit in the first quarter of 2009. FA ranks also grew slightly to 6,783, an increase of 23, as the wealth management/brokerage firm edged closer to profitability. Client assets climbed by just over $1 billion, or one billion Swiss francs, to CHF743 billion (or $724 billion).
"UBS has the best of the old ML, including many of the same personnel that I admired, respected, and relied on, combined with some of the best talent and offerings in the world,” according to UBS broker Tom Zur. “UBS does not have unnecessary layers of management, just a committed group from the top down dedicated to excellence, service and the success of our clients," he added.
The Americas wealth management business, based in Weehawken, N.J., reported net new money of $292 million compared with reported withdrawals of some $38 billion in the previous five quarters. UBS said the unit actually made a profit of $31.44 million in the third quarter excluding a one-off charge of about $78 million in an arbitration matter.
“This is not a perfect picture by any means for UBS,” said industry analyst Bing Waldert at Cerulli Associates. “But it is a sign of hope. There are reasons for optimism here that’s reflected in its asset growth. The outflows have also stopped. ”
Indeed, revenue was down $1.31 billion, a decline of 10 percent from the previous quarter even though operating expenses fell 7 percent, excluding the arbitration charge. The decline reflects staff reduction in operations and back-office support and the shuttering of redundant real estate.
Another analyst said the third-quarter results for the Americas unit contained some “great news” for UBS. Alois Pirker at Aite Group said that “stopping the bleeding of client assets was a super high priority for UBS.”
However, he said the Americas business still had challenges to overcome such as, a cost structure that was “way too high and a problem” and costly personnel charges, including broker compensation. A boost in broker productivity, via more product sales and better broker technology, as well as improving market conditions, could clearly lift UBS and help offset this, he noted. “The growth story is missing,” Pirker said.
Still, UBS Wealth Management Americas is in a better place today since Bob McCann, the former Merrill Lynch brokerage chief took the helm about a year ago. (Bob McCann was named as one of Registered Rep.'s Ten to Watch this past August.) And not only financially. Morale among the rank and file is said to be much improved since McCann took charge, and set about slashing layers of managements, hiring talent from Merrill, streamlining and reorganizing the once seriously beleaguered unit.
One ex-Merrill broker, who joined UBS in Aventura, Fla., in the summer, recently told Registered Rep. how the UBS unit reminded him of the thundering herd before it was acquired by Bank of America. He was not impressed with the new Merrill Lynch.
Nevertheless, UBS in the Americas and globally, is still not out of the woods, analysts say, as it recovers from the damage it suffered from losses linked to subprime lending, the sale of toxic assets and a controversial tax evasion case. John Cryan, CFO of UBS AG, says boosting the profitability of wealth management remains a major priority. Pirker at Aite Group said UBS Wealth Management Americas is “sailing close to profitability” but has more work to do.
The Americas unit of Swiss banking giant UBS AG—in a rebuilding mode globally—reported a third-quarter pre-tax loss today of $46 million. That’s an improvement of some 30 percent over the last quarter loss of $63.8 million; it compares with a loss of $107 million a year ago. (UBS AG reported a $1.71 billion net profit in the third quarter boosted by a strengthening of the Swiss franc against major currencies. Wealth management revenues though were down globally.)
