The "turning point" in client fund outflows is about to appear for UBS Wealth Management Americas, UBS Chief Financial Officer, John Cryan, said today, as the brokerage business of the Swiss banking giant showed an underlying profitability of $72 million in the second quarter. Outflows at the Americas unit, led by CEO Bob McCann, were $2.47 billion compared with $6.8 billion in the first quarter.
The profitability at the US wealth management business was touted today by UBS as a positive sign of financial improvement at the troubled brokerage, but it excludes restructuring charges in the second quarter. Once these "one-off" costs, mainly associated with redundancies and the closure of branches, are included, the wealth management business in the Americas had a second quarter pre-tax loss of $61 million.
Still, the second-quarter profitability was more than twice as large as the $34 million the UBS Americas business earned in the first quarter, according to UBS. UBS Chief Executive Oswald Gruebel told reporters today he was supportive of the Americas business, which he predicted would be highly profitable in the future. Client assets in the division stood at some $687 billion (742 billion francs) at the end of June. That's a drop of three percent from the first quarter but it is up one percent from 12 months earlier.
The Americas business, which employs some 16,760, saw a net loss of 107 financial advisors, or two percent in the second quarter, as the number of non-FA employees decreased by 2 percent, or 219, to 9,581. The FA attrition rate has slowed dramatically to an annualized rate just under eight percent. "We're heading in the right direction, progressing toward the strategy Bob McCann has outlined, as well as progressing against our peers," a spokesperson for UBS told Registered Rep.
Indeed, the spokesperson noted that Wealth Management Americas, as measured by U.S. standards, is "positive" in net new money of $1.8 billion in the second quarter (factoring in interest and dividend income).
"Our net new money, or NNM, is from 'same store FAs,' or FAs who have been with UBS for more than a year, so the money is coming from clients trusting their UBS advisor with more of their assets or new clients signing on," the spokesperson explained.
The UBS Americas division also has the highest average level of invested assets per advisor-- that's a sum of $95 million -- among its three largest peers: Merrill Lynch, which has $93 million; Morgan Stanley Smith Barney, $83 million and Wells Fargo, $60 million.
"We are committed to acquiring, developing and retaining financial advisors who focus on high net worth and ultra high net worth clients. We will concentrate investment in the most attractive and profitable wealth management markets and in our largest and best-performing branches," according to UBS in its earnings report today.
Meanwhile, the parent company reported a net profit of $1.90 billion (2 billion Swiss francs) today. That's its third quarterly profit in succession after a series of big losses in 2008 and 2009. The profit was well above forecasts for $1.24 billion (1.34 billion francs.)
