UBS Americas Profit Rises Despite Advisor Losses, Asset Outflows
UBS Group AG’s Americas wealth business generated a 12% jump in third-quarter profit, despite client outflows and a smaller advisor force, as it cut expenses at a faster rate than it lost revenue, the Swiss bank said Tuesday.
UBS Chief Executive Sergio Ermotti, who is retiring on November 1, singled out the company’s U.S. wealth business for executing on core strategies such as cross-selling loans and asset management products to their wealthy customers.
“Our full commitment to the Americas is paying off,” Ermotti said on a conference call with analysts.
The Swiss bank’s Wealth Americas brokerage force, which includes advisors in the U.S., Latin America and Canada, continued to shrink. The wealth unit had 6,353 advisors as of quarter-end, down a net 57 from June 30 and by 274 from 12 months earlier.
UBS does not break out how many of its brokers are U.S-based, but brokers citing internal ratings said the domestic count has dropped below 6,000 from a peak of over 8,000 when the firm was aggressively recruiting. UBS Americas President Tom Naratil four years ago swiveled from recruiting to retention as the bank sought to reduce the overhang of more than $3 billion of U.S. recruiting loans. The loans as of September 30 were $1.86 billion, down 13% from a year earlier.
The U.S. wealth arm, which pulled out of the Protocol for Broker Recruiting in 2017 in an effort to keep veteran brokers from bolting to other firms, recently restarted recruiting selectively. It has been focusing on teams from private banks with expertise in selling credit products along with investments.
Existing advisers in the Americas last quarter generated $5.2 billion in net new loans, which Ermotti praised as an “impressive” number. UBS brokers, like colleagues at Morgan Stanley and Merrill Lynch, have been promoting fixed-rate non-margin loans collateralized by customers’ securities portfolios, and a targeted effort at UBS in July and August “generated significant demand,” the company said. UBS at the start of 2020 also eliminated fees on proprietary separately managed accounts in the U.S., drawing $8 billion of SMA money to its Asset Management coffers in the third quarter.
But client flows at UBS Americas overall deteriorated amid the pandemic. After two quarters of positive net new assets, the metric reversed to net outflows of $9.2 billion, the bank said. Withdrawals were exaggerated by $5.5 billion as customers pulled money to pay taxes whose April due date was extended by the IRS to July to accommodate COVID-19 setbacks, UBS said.
Bank of America earlier this week said Merrill Lynch and private bank clients added $1.39 billion of net new money last quarter, while Morgan Stanley said its 15,400 brokers attracted $23.8 billion to fee-based advisory accounts alone in the third quarter.
Total revenue at UBS Wealth Americas fell 3.7% in the July-September period to $2.24 billion from the year-earlier period. Clients moved to lower-margin funds during the quarter, UBS said, and net interest income was slashed due to Federal Reserve rate cuts that have dramatically narrowed net interest margins across U.S. banks.
Rising markets helped invested client assets at UBS Wealth Americas grow 8% to $1.44 billion from the year-earlier increase.