UBS’ U.S. Brokerage Boosts Profits, Boasts Most Productive Advisors

Despite global market conditions that lowered asset-based fees and transaction-based income, UBS Wealth Management Americas ended 2011 on firmer footing, earning $573 million for the year on revenues of $5.96 billion. Last year, the unit of Swiss bank giant UBS lost $33 million on $5.3 billion in revenue.

After grappling with the credit crisis of 2007, a tax evasion scandal and subsequent mass defection of advisors, UBS’ American unit appears to have turned the corner. The firm recruited an additional 170 advisors, growing total ranks to 6,697 with total client assets under management of $754 billion. The brokerage reported net new money of $13.7 billion for full-year 2011 ($34.4 billion including dividends and interest) compared to outflows of $5.9 billion for 2010.

FA turnover at the Americas brokerage last year declined from the high teens in 2009 - when the head of the U.S. brokerage unit Robert J. McCann joined the firm from rival Merrill Lynch – to between 3.4 percent and 2.9 percent today (for advisors with more that $1 million in production,) the company said.

In fact, UBS says it has some of the most productive industry brokers as measured by revenue per FA. Among peers it was No. 1 in the fourth quarter, according to company reports. (Bank of America/Merrill Lynch: $819,000; Morgan Stanley Smith Barney: $755,000 and Wells Fargo: $607,000).

The U.S. brokerage unit’s performance was all the more remarkable given the deterioration of earnings at the corporate level. UBS worldwide had a net profit of $430 million in the fourth quarter, a drop of 76 percent from $1.81 billion in the same period a year ago as market conditions worsened.

Despite the strong showing for the Americas brokerage, Aite Group analyst and former UBS executive Alois Pirker still speculates the unit will be put up for sale or spun off unless the firm can grow earnings inside existing businesses as opposed to recruiting new advisors with upfront costs.

UBS says its strategy "centers on our pre-eminent global wealth management businesses, encompassing both Wealth Management and Wealth Management Americas." UBS CEO Serio Ermotti said in November. "By the way, again, our Wealth Management Americas business is an integral part of our strategy and is not for sale.”

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