UBS Wealth Management Americas continues to improve, today reporting pretax profit of $165 million for the second quarter ended June 30. That compares with a loss of $61 million in the same period last year—and a jump of 39 percent from the first quarter of this year when the brokerage unit had pretax profit of $119 million.
The once embattled Wealth Management Americas unit reported a dip in net new money (NNM) – including dividends and interest -- from $8.4 billion in its last quarter to $7.9 billion in the latest quarter, down six percent. But UBS notes that the decline reflects annual client “income tax-related withdrawals.” In fact, NNM is up $7.9 billion, a 314 percent jump over the second quarter of 2010.
“It does look like Wealth Management Americas did fine,” Rochdale Securities’ analyst Dick Bove, told Registered Rep. as he began parsing the latest UBS earnings. In fact, in our annual Advisor Report Card, published in December 2010, UBS rank and file indicated that they were happier than a year ago, as evidenced by our employee satisfaction survey.
The Americas Wealth Management unit added 51 financial advisors (net) in the latest quarter, bringing its FA headcount to 6,862 versus 6,811 in the previous period. That represents an overall 12-month increase of 102 FAs.
Meanwhile, Americas CEO Bob McCann moved closer to his annual pretax profit target of $1 billion. Still, its latest (and improved) quarterly pretax profit, measured on an annualized basis, translates into $660 million. That’s still wildly short of McCann’s target announced soon after he took the helm at UBS Wealth Management Americas in October 2009. That’s when he vowed to turn around the troubled business. At the time the unit was being hammered by massive client withdrawals, the past sale of dodgy securities and the flight of frustrated FAs. (That on top of the trouble aplenty at the parent company in Switzerland.)
But the Americas has plenty of positive indicators in the latest second quarter results: Revenue climbed by 4 percent to $1.5 billion, from $1.45 billion in the previous quarter; and jumped 12 percent from $1.35 billion in the second quarter of 2010. Invested assets were $774 billion in the second quarter compared with $761 billion in the previous quarter, a 2 percent rise; that’s a 23 percent increase from a year earlier.
UBS said invested assets per FA had climbed 1 percent from $112 million in the last quarter to $113million in the second quarter. That compared with invested assets per FA of $95 million a year earlier, or an increase of 20 percent. Revenue per financial advisor has risen 3 percent from the first quarter of 2011 when it was $855,000 to $884,000 in the latest quarter. It’s up 12 percent from the second quarter of 2010 when revenue per FA was $793,000.
Richard Bove of Rochdale Securities said it was of course theoretically possible that the strong Swiss franc could reverse course and weaken against major currencies, and then lift the bottom line at UBS. “But the Swiss franc is now being used the way gold is being used,” he said, referring to gold’s attraction to investors as a safe haven in a troubled global economy.
The parent company, UBS AG (Ticker: UBS), Switzerland’s biggest bank – recall this bank was rescued in 2008 by the Swiss government after breathtaking losses – reported a drop in net profit, from some $2.5 billion a year earlier to some $1.27 billion in the quarter ended June 30, 2011.
UBS said weak market conditions and a strong Swiss franc hurt company performance, which would result in cuts in some divisions in the coming two to three years. But the bank ruled out cost-saving reductions among the ranks of its financial advisors worldwide and in its key wealth management business.
Not For Sale
Once again, UBS repeated it had no intention of selling its now profitable Americas business. Most recently, Wells Fargo was rumored to be an interested buyer. UBS Chief Executive Oswald Gruebel, refuting the rumors, said today it was critical for the Swiss bank to have a strong wealth management business in the Americas, Asia Pacific, Europe and Middle East regions, since they account for the best opportunities for growth.
Said Gruebel: "As I have said before, our Wealth Management business in America is not for sale. And I only say that because these rumors keep coming up lately."
Thomas Naratil, CFO of UBS AG, also publicly dismissed the rumors. "Improvements in Wealth Management Americas are quite visible and in line with our plans,” Naratil said. “And as Ossie mentioned, contrary to market rumors, this division is part of our Global Wealth Management business and is not for sale."
The parent company, UBS AG (Ticker: UBS), Switzerland’s biggest bank – recall this bank was rescued in 2008 by the Swiss government after breathtaking losses – reported a drop in net profit, from some $2.5 billion a year earlier to some $1.27 billion in the quarter ended June 30, 2011.
UBS said weak market conditions and a strong Swiss franc hurt company performance, which would result in cuts in some divisions in the coming two to three years. But the bank ruled out cost-saving reductions among the ranks of its financial advisors worldwide and in its key wealth management business.