| NEW YORK
NEW YORK May 6 UBS AG has set tighter
expense control targets for its Americas wealth management
business, Switzerland's biggest bank said Tuesday as it reported
a 7 percent rise in first-quarter net profit prompted by lower
taxes and cost-cutting.
The U.S. brokerage business, which like other big firms has
been paying lucrative signing bonuses to recruit top-tier
advisers, aims to bring costs down to 75 percent to 80 percent
of operating income from the former target of 80 percent to 90
percent, according to a slide presentation accompanying a talk
Tuesday by UBS Wealth Management Americas Chief Executive
officer Robert McCann.
The ratio of costs to revenue topped 90 percent from 2009,
when McCann joined, through the end of 2012. It fell in 2013 to
what analysts consider a still lofty 86 percent. The Swiss
bank's global wealth business has a growth-to-income ratio
target of 60-70 percent and was 66 percent in 2013.
UBS did not outline specific plans for cost-cutting.
However, the presentation said it aims to grow revenue in the
Americas by continuing to sell mortgages and other banking
products along with fee-based financial planning services to
wealthy investors while focusing on "front-office efficiency."
UBS has introduced an incentive program to encourage referrals
among its bank and brokerage employees.
The company said its median client asset base of $1 million
or more is higher than at competitors such as Morgan Stanley
, Bank of America's Merrill Wealth or Wells Fargo
& Co's Wells Fargo Advisors.
The U.S.-based brokerage business, an offshoot of the
PaineWebber network that UBS bought in 2000, generated record
pretax profit in the first three months of 2014 of $272 million,
up 30 percent from a year earlier.
Its operating income of $1.86 billion was up 1 percent from
last year's fourth quarter and 10 percent from a year earlier.
Operating income grew on the back of higher managed account
fees that was largely offset by higher operating expenses, the
UBS Wealth Americas' brokerage force fell by 24 during the
quarter to 7,113, by far the smallest of the big U.S. brokerage
firms, but was up from 7,065 financial advisers a year ago.
Average revenue per broker fell slightly from last year's fourth
quarter $1.03 million from $1.04 million.
The firm's experienced brokers help bring in net new money
of $2.1 billion from clients but the total was up less than one
percent from a year earlier because of attrition of financial
advisers. UBS's target for net new money growth is 2 to 4
percent of clients' invested assets.
Despite setting new cost-to-income targets, the company
maintained other performance goals. It seeks adjusted pretax
profit growth of 10-15 percent annually in its Americas and
global wealth management businesses. Its gross profit margin
target remains at 75 percent to 85 percent in the U.S. and
95-105 percent globally. It met the U.S. target last year with a
margin of 79 percent.
Parent UBS said earlier on Tuesday it will revamp its
corporate structure to ensure it can be broken up more easily in
a crisis, cutting the amount of money it must set aside for
potential losses and allowing it to pay shareholders a special
(Reporting by Jed Horowitz; Editing by Chizu Nomiyama)