Lower client activity weighs on UBS Americas wealth business
NEW YORK Oct 29 (Reuters) - UBS AG's Americas wealth management unit said on Tuesday that third-quarter pretax profit rose 32 percent, but retreated from a record high last quarter, pressured by lower client activity, trading losses and credit loss expenses.
The Swiss bank recorded a pretax profit of $218 million for its U.S. wealth division, up from $165 million a year ago, but below its record $245 million in the quarter ended in June.
"Brokerage activity has been down in general," said Sophie Schmitt, senior wealth management analyst at Boston-based Aite Group. "In the first and second quarter, everyone was getting back into the stock market, and in the third quarter everyone was holding onto positions, so there was less trading."
Net fee and commission income fell by $42 million during the quarter, mainly due to a 14 percent decline in transaction-based revenues on the back of lower client activity, UBS said.
Still, invested assets at UBS Wealth Management Americas rose 10 percent from a year ago to $919 billion, largely driven by higher managed-account assets, which were up 5 percent. They made up 31 percent of the unit's total invested assets at the end of September.
UBS Wealth Management Americas, formed out of the old PaineWebber brokerage and run by former Merrill Lynch wealth chief Robert McCann, contributed roughly one-third of the Swiss bank's total profit. Third-quarter net profit at UBS AG was $644 million (577 million Swiss francs).
NET NEW MONEY FLOWS RETREAT
Net new money inflows at the Americas wealth unit - which fell below the firm's target growth range - were $2.1 billion at the end of September, down from $2.8 billion in the prior quarter and less than half the level a year ago, when it had $4.8 billion in net new money.
UBS cited lower inflows from recruited financial advisers.
UBS expects unresolved economic issues in Europe and the United States, which hurt client activity during the quarter, to continue to pressure client confidence going into the fourth quarter.
"This would once again make improvements in prevailing market conditions unlikely, and would consequently generate headwinds for revenue growth, net interest margins and net new money," the Swiss bank said in a statement.
Revenue per broker at the unit, which topped $1 million last quarter, declined in the latest quarter to $994,000, but was still 12 percent higher than a year ago.
PRESSURE FROM PUERTO RICO
The operation was also hurt by losses in the Puerto Rico municipal market, UBS said.
Puerto Rico bond prices have been in a free fall amid renewed fears about the island's chronic deficits, free spending and high unemployment.
UBS' Americas wealth unit reported $21 million in credit loss expenses, mostly related to securities-backed lending facilities collateralized by Puerto Rico municipal securities and related funds, during the quarter. Net trading income fell 23 percent from a year ago to $94 million at the end of September, also affected by the Puerto Rican market.
UBS' N.Y.-traded shares fell 7.2 percent to $19.82.