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Wealth Management Profits Rose At UBS In 2011

Tom Burroughes, Group Editor , London, 7 February 2012

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UBS’ wealth management businesses collectively logged SFr5 billion (around $5.4 billion) in inflows over the final quarter of last year.

UBS’ wealth management businesses collectively logged SFr5 billion (around $5.4 billion) in inflows over the final quarter of the year, the Swiss bank said, noting robust inflows in regions such as Asia as well as a lessening of the negative impact of the recent strength of the Swiss franc. For the banking group as a whole, quarterly profits fell sharply.

For the full year, wealth management pre-tax profits rose 16 per cent year-on-year in wealth management to SFr2.7 billion; for its wealth management Americas arm, full-year profit was SFr504 million, representing a turnaround from a loss of SFr130 million in 2010, UBS said in a statement.

Switzerland’s biggest bank made no reference to last year’s $2.3 billion loss caused by unauthorised trading at the firm’s London-based investment bank. The UK and Swiss regulatory authorities have announced they have started enforcement activities against UBS and the firm has said it is co-operating with authorities. Last September, Oswald Grübel resigned as chief executive and was eventually replaced by senior UBS manager Sergio Ermotti. The bank has subsequently announced it will significantly reduce risk exposures by its investment banking operations.

Wealth management

Outside the Americas, the Zurich-listed bank said wealth management’s pre-tax profit was SFr471 million in the fourth quarter of last year, down from SFr888 million in the previous quarter, which included a gain of SFr433 million from the sale of its strategic investment portfolio and SFr85 million of restructuring charges.

Excluding this gain, the gross margin on invested assets declined by 6 basis points to 91 basis points as a result of lower client activity and lower interest income. Net new money inflows of SFr3.1 billion were recorded in the fourth quarter. International wealth management reported slightly higher net inflows of SFr4.2 billion, as net inflows continued in Asia-Pacific and emerging markets, as well as globally from ultra high net worth clients. In Europe, UBS reported small net new money inflows.

Invested assets were SFr750 billion on 31 December, up by SFr30 billion from 30 September 2011, with half of the improvement occurring towards the end of the quarter. This increase mainly reflected a recovery in global equity markets during the quarter, the depreciation of the Swiss franc against the dollar and net new money inflows.

Wealth Management Americas

Wealth Management Americas’ pre-tax profit in the fourth quarter of 2011 was SFr114 million, compared with SFr139 million in the prior quarter. In dollar terms, operating income fell 5 per cent as a result of lower fees and commissions as well as a decrease in income from financial investments held in our available-for-sale portfolio.

Net new money was SFr1.9 billion, compared with SFr4.0 billion in the previous quarter. Net recruiting of financial advisors drove net new money during the quarter.

The gross margin on invested assets in Swiss franc terms decreased by 2 basis points to 78 basis points, as income increased 3 per cent compared with a 5 per cent increase in average invested assets, UBS said.

For the UBS firm as a whole, the firm reported a net profit attributable to shareholders of SFr4.2 billion in 2011. For the fourth quarter, net profit attributable to shareholders was SFr393 million, down sharply from SFr1.018 billion in the third quarter of 2011.

At the end of the year, the firm had a Basel II Tier 1 capital ratio of 18.4 per cent.

“UBS also intends to issue loss-absorbing capital in 2012 as a step towards meeting the Swiss regulator's requirement that systemically important banks hold up to 19 per cent in total Basel III capital in future,” the firm said.

 

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