In the backdrop of UBS Group AG’s second quarter earnings announcement on July 23, the Americas division of the Swiss company’s UBS Global Wealth Management unit continued its hot streak.
Adjusted profits before taxes at the Americas high-net-worth advisory division rose 4% year over year and 10% quarter over quarter to a record $367 million. By contrast, profits befofe taxes at the other divisions of the Swiss bank’s wealth management unit fell year over year and quarter over quarter.
This even as net new money fell at the division by 8.3% during the quarter, which the bank attributed in part to tax season. To understand the extent of the Americas division's contribution to the bank’s overall earnings, it should be noted that UBS Group AG derived a significant chunk of its earnings — $874 million of its $1.75 billion in operating profits before taxes in the second quarter of this year — from its global wealth management business. The American unit is far and away the largest part of that business and generated 54% of its profits during the quarter.
The bank's Americas wealth unit also reported the number of its advisors has fallen to 6,689 from 6,937 a year ago, a planned culling of the ranks as UBS drives its advisors to focus on more profitable, high-net-worth clients. "We delivered top line growth with fewer advisors, consistent with our strategy, and average annualized revenue per advisor increased to a record $1.3 million, ahead of U.S. peers, and we improved our efficiency to the lowest cost income ratio we've ever had," said Kirt Gardner, UBS Group AG's chief financial officer, during Tuesday's earnings call.
What is more, the Americas unit may be on a roll for some time to come, if its own surveys are to be believed. According to UBS Global Wealth Management’s new Investor Sentiment survey, the results of which were released with earnings, U.S. high-net-worth individuals and business owners are “expressing growing intentions to invest as U.S. markets continue to hit record highs in 2019.” The company polled 3,800 “wealthy investors and entrepreneurs” in 17 countries.
Sergio P. Ermotti, UBS Group AG's CEO, said on the company’s earnings call that “our strategy and growth ambitions here are very clear: we want to increase wealth management profit margins to 25% in the U.S. and become the market leader in LatAm.”
UBS announced last year an ambitious plan for its American AUM to reach $70 billion in net inflows. When asked about that target by J.P. Morgan Chase & Co. analyst Gardner said the $70 billion U.S. strategy is “more of a medium-term objective … we’ve laid all the groundwork, we’ve built out our ultra teams and we’ve ring-fenced them, we’ve built out our GFO (Global Family Office) teams. We’ve identified the target client set and as we highlighted, the majority of those clients already have relationships with us, so we have an ongoing dialogue and we put in place some of the other ultra net worth offering capabilities and we’re now starting to build a pipeline.” He added that UBS “would expect to see some actual inflow momentum in the second half of the year that should grow as we go through the year.”
