UBS says fees, gains boost U.S. brokerage profit 28 percent

NEW YORK, July 31 Tue Jul 31, 2012 9:09am EDT

NEW YORK, July 31 (Reuters) - UBS Wealth Management Americas, the U.S. brokerage arm of Swiss bank UBS, reported a 28 percent increase in second-quarter earnings, fueled by investment portfolio gains and higher asset-management fees.

UBS said the brokerage generated $211 million in quarterly pretax profit as revenue rose 5 percent to $1.59 billion from a year earlier. Increases in management fees offset lower commissions, as client trading activity slowed, and a decline in net interest income.

Operating expenses rose 3 percent to $1.38 billion at UBS Wealth Management Americas, fueled by higher broker compensation and the lingering impact of recruiting bonuses. Nonbroker compensation and other general expenses fell.

The ranks of UBS brokers have been expanding in the past year after being gutted in 2008 and 2009 by departures triggered by the bank's financial crisis losses and by several regulatory setbacks. During the second quarter, they rose by just six advisers to 7,021 from the end of March, but were up 2 percent from 6,862 a year earlier.

Customers added $3.8 billion of net new money during the quarter, excluding interest and dividends on investments already in accounts. Overall client assets slipped 2 percent to $838 billion, though, reflecting falling stock prices during a period of renewed worries about the outlook for the U.S. economy and Europe's debt crisis.

Still, UBS said annualized average broker production had risen 1 percent to $905,000 from the first quarter, while client assets per adviser slipped by $1 million to $114 million. Bank of America Corp's Merrill Lynch, by comparison, reported average production had fallen 5 percent to $915,000 in the second quarter.

UBS realized $63 million of gains during the quarter from selling securities to rebalance its own investment portfolio.