UBS Brokerage Breaks Profit Record

UBS Wealth Management Americas (WMA) expanded its advisor force by 48 to 7,015 financial advisors in the last quarter as the brokerage unit of the Swiss banking giant posted both record pre-tax profit and invested assets. In first-quarter earnings released today, UBS WMA reported a pre-tax profit of $209 million -- up 34 percent from $156 million in the fourth quarter, and an increase of 75 percent from $119 million a year ago. It had invested assets of $807 billion, up seven percent from $756 billion in the fourth quarter of 2011.

UBS WMA spokeswoman Karina Byrne said pre-tax profit and invested assets broke quarterly records. “It was another solid quarter,” she added. UBS WMA reported revenue of $1.57 billion, a jump of four percent from $1.504 billion in the last quarter, and up eight percent from $1.45 billion in the same year-ago quarter. UBS attributes the growth primarily to higher transaction-based revenue, higher realized gains from the sale of certain non derivative financial investments, growth in managed account fees as well as higher banking and lending-related interest income. (Worldwide, UBS said its wealth management units attracted $12 billion in net new funds in the latest quarter. Net income worldwide in the first quarter fell 54 percent to $904 million from $1.97 billion in the same year-earlier period.)

The once embattled wealth management unit led by former Merrill Lynch brokerage chief Bob McCann had net new money (NNM) of $4.66 billion in the latest quarter, up 119 percent from $2.1 billion in the fourth quarter of 2011. That’s a rise of 18 percent from $3.9 billion in the same year-ago quarter. NNM was $9.3 billion for the latest quarter including dividends and interest.

The latest UBS WMA earnings come on the heels of an exceptional 2011 for UBS WMA, according to Aite Group’s recent report, New Realities in Wealth Management. Bank of America Merrill Lynch, Morgan Stanley Smith Barney and UBS all reported four quarters of positive net new money last year. However, Morgan and BofA Merrill said client assets had declined at a rate of between 1.2 percent for Morgan and 4.7 percent at BoA Merrill. Wells Fargo does not report net flow numbers. Aite said UBS was an exception, seeing client assets grow by almost 2.4 percent in 2011.

“Certainly this has been a result of five quarters of consistently positive net new money flows fuelled by an expansion of UBS’ advisor force,” according to Aite analysts’ Alois Pirker and Sophie Schmitt. “The firm increased its number of advisors at 2.5 percent in 2011, a rate very similar to the growth in assets observed during this period.”

Substantial sign-on bonuses made the hiring of experienced advisors a costly undertaking, the analysts added. Still,UBS WMA said itsrevenue per advisor had reached $897,000, up three percent from $869,000 on the previous quarter, and a rise of five percent from $851,000 on the year-ago quarter.

McCann took the reins at UBS WMA in October 2009 pledging to turnaround the troubled business. Clients were massively withdrawing money. McCann is inching closer to annual pretax profit target of $1 billion. UBS WMA’s cost/income ratio improved in the latest quarter to 87 percent, within its target range of 80-90 percent.