Quarterly pre-tax profits rose sharply at the wealth management business of UBS, with the Americas side of the operation chalking up the highest-ever reported quarterly profit for the first three months of the year.

Quarterly pre-tax profits rose sharply at the wealth management business ofUBS, with the Americas side of the operation chalking up the highest-ever reported quarterly profit for the first three months of the year.

Switzerland’s largest bank said wealth management pre-tax profit was SFr803 million ($1.3 billion) in the first quarter of 2012 compared with SFr471 million in the previous quarter, and included a reduction in personnel expenses of SFr237 million related to changes to its Swiss pension plan. Adjusted for this item and restructuring charges, pre-tax profit increased by SFr110 million to SFr578 million.

In the Americas business of UBS, meanwhile, the division achieved its highest reported quarterly pre-tax profit of $209 million in the first quarter of 2012 compared with $156 million in the prior quarter. “The quarter was marked by higher transactional activity and included higher realized gains on sales of financial investments in the available-for-sale,” it said.

Across the whole of UBS, meanwhile, first-quarter net profit attributable to UBS shareholders was SFr827 million in the first quarter of 2012 compared with SFr319 million in the fourth quarter of 2011.

The bank had a Basel 2.5 Tier 1 ratio of 18.7 per cent.

The results, which showed the Americas' business had a pre-tax margin of almost 13 per cent, are the best since this business was acquired by UBS back in 2000 (the old PaineWebber business), according to Christoper Wheeler, analyst at Mediobanca in London. 

Momentum

The results were issued a few days after one of UBS’s top wealth management bosses told this publication that the firm now has “forward momentum” and is recovering strongly from a number of blows suffered in the aftermath of the 2008 financial crisis.

For wealth management (excluding the Americas), UBS said total operating income increased by SFr96 million to SFr1.769 billion from SF1.673 million, mainly due to higher net fee and commission income, reflecting higher client activity levels from very low levels seen in the previous quarter.

The annualized net new money growth rate was 3.6 per cent compared with 1.7 per cent in the previous quarter, it said. Net new money was SFr6.7 billion, compared with SFr3.1 billion, due to strong inflows in Asia-Pacific, emerging markets and wealth management in Switzerland, as well as globally from ultra high net worth clients.

The gross margin on invested assets increased by 2 basis points to 93 basis points, mostly reflecting an improvement in client activity levels. Invested assets were SFr772 billion on 31 March, up by SFr22 billion from 31 December 2011.

Americas

In the Americas wealth business, operating income rose by $64 million to $1.568 billion from $1.504 billion.

Annualized net new money growth for the first quarter was 2.4 per cent, compared with 1.2 per cent in the fourth quarter. Net new money rose to $4.6 billion from $2.1 billion. Net recruiting of financial advisors contributed most of the inflows last quarter, while financial advisors employed with UBS for more than one year contributed to a lesser extent.

In US dollar terms, the gross margin on invested assets decreased by 2 basis points to 80 basis points. A 4 per cent increase in income was outpaced by a 6 per cent increase in average invested assets.