UBS Wealth Management Americas added client assets and (a handful of) advisors in the fourth quarter, cushioning the blow from steep legal costs that resulted in a pre-tax loss of $34.6 million. That is a slight improvement from a loss of $49 million in the third quarter though down from a profit of $186 million a year ago.
Past problems from the sale of toxic products came back this latest quarter to haunt the troubled brokerage unit of the Swiss bank giant.The Americas brokerage unit has been saddled by continuing lawsuits and arbitrations. It incurred legal costs and this quarter reported a substantial $159 million litigation provision.
Still, excluding the charge, the underlying Americas business would have recorded an accounting profit in excess of $100 million. “We are trending in the right direction and continuing to improve across various metrics,” UBS spokeswoman, Karina Byrne, told Registered Rep.
The advisor population expanded by 13 FAs to 6,796, with turnover at its lowest quarterly level since 2006. The business reported $3.6 billion of net new client assets and revenues of $1.5 billion, an improvement of 7 percent, and its highest level since the third quarter of 2008. In the third quarter, net inflows were $313 million. UBS credited stronger broker productivity among advisors with a year or longer experience for the latest upswing.
One UBS insider said the outlook among executives is positive. He noted that the UBS Americas unit is anxious to put the legal troubles behind it—and fast.
"This could possibly be the last quarter we have to deal with these legal cases and charges," he added. "The sense is that things are finally turning around with underlying profitability going gangbusters."
These legal troubles, which include the sale of busted Auction Rate Securities and overshadowed by a controversial tax evasion case at UBS that helped trigger a flight of assets, were inherited by CEO Bob McCann when he joined the Americas unit over a year ago.
"I can't see why UBS Wealth Management Americas can't make it through all this and it should be able to survive, too, as a standalone entity," said Bing Waldert, an industry analyst at Cerulli Associates. (UBS executives, speaking at the company-wide earnings announcement today, once again claimed that the Americas unit is not for sale and it won't be spun off. Globally, Switzerland's biggest bank in the fourth quarter reported total net new money of just over $7.1 billion) Still, there's a ways to go, as McCann's stated goal is $1 billion in annual pre-tax profit within three to five years. "UBS was more knocked around that some of the other firms because their failures at the bottom were a little more spectacular than most other firms," said Waldert, referring to the events surrounding the credit crisis.
One UBS advisor who spoke to Registered Rep. said things are headed in the right direction. "I moved my practice here last year from a large wirehouse and I like the way the business is moving, There are no gaps in service and UBS is covering every base," said the advisor, speaking on condition of anonymity.