UBS Americas brokerage posts loss

NEW YORK (Reuters) - UBS Wealth Management Americas lost assets and advisers during the second quarter and was UBS AG's only unprofitable division, though it offered signs the embattled unit is on the mend.

The brokerage, which does business in the United States and Canada, reported net withdrawals of 2.6 billion Swiss francs ($2.47 billion) over the quarter, excluding interest and dividends. That was an improvement from the 7.2 billion francs withdrawn by customers during the first quarter.

Competitor Morgan Stanley last week reported second-quarter outflows in its wealth management division of $5.5 billion, including interest and dividends. On that same basis, UBS said it would have had net inflows of 1.7 billion francs.

Bank of America Corp's Merrill Lynch and Wells Fargo Advisors do not disclose asset flows.

"I think it's going in the right direction," said Alois Pirker of Boston-based consultants Aite Group. "This is very much the beginning. If you look at their targets, there is still a good chunk a work that needs to be done."

Client assets at UBS Wealth Management Americas stood at 742 billion francs at the end of June, down 3 percent from the first quarter, but up 1 percent from a year earlier.

It posted a pretax loss of 67 million francs, primarily due to charges of 146 million francs related to layoffs and the closure of branches.

Ignoring the charges, UBS said the business would have posted a pretax profit of 79 million francs, more than double the 36 million francs it earned in the first quarter.

The division lost a net 107 advisers, to finish the quarter with 6,760.

"They have new blood at the top but it's like turning around a tanker: it takes a while," said Scott Smith of Boston-based consultants Cerulli Associates.

The bank's average revenue per adviser was $793,000, up one third from the same quarter last year. UBS lagged the $853,000 per adviser at Merrill Lynch but exceeded the production of Morgan Stanley advisers, which reported $679,000 per adviser.

Each UBS Americas adviser oversaw an average of $95 million in client assets, compared to $83 million at Morgan Stanley. Merrill Lynch and Wells Fargo do not disclose that figure.

Revenue rose 9 percent to 1.5 billion francs, fueled by higher managed-account fees and investment portfolio income at UBS Bank USA.

Earlier this year Wealth Management Americas CEO Robert McCann said he was aiming for annual pretax profit for the division of over 1 million francs within the next three to five years.

He also aims to boost average revenue to 1 million francs per adviser.

The parent company, which has global investment banking, wealth and asset management businesses, turned in a profit of 2 billion Swiss francs ($1.90 billion), its third quarterly profit in a row after a string of big losses in 2008 and 2009. That was well above analyst forecasts for 1.34 billion francs.

UBS Wealth Management Americas said its financial adviser ranks declined by 2 percent as departures outpaced recruits. The unit also cut 219 back-office and support jobs during the quarter, reflecting a brokerage force that has shrunk 15 percent in the past year.

Analysts and investors have long complained that the U.S. brokerage business, once known as Paine Webber, is a drag on UBS' financial performance and should be sold or spun off. Those cries grew louder last year, as hundreds of advisers departed for rivals or independent firms.

UBS Group Chief Executive Oswald Gruebel said on Tuesday he remained committed to the U.S. business.

"It will be a very profitable business going forward," he told Reuters. "But first we have to bring it in shape. In the last few months we have solidified our niche. All along it is a good business to be in, even if it has a high cost base."

(Additional reporting by Lisa Jucca in Zurich; Editing by Ted Kerr and Tim Dobbyn)