UBS Group AG has said that client activity is still recovering after investors pulled US$13 billion of assets in the final quarter of last year, adding that wealth management revenues would be hit by the market declines.
Withdrawals at the Zurich, Switzerland-based bank’s key global wealth management unit totaled almost US$8 billion in the fourth quarter, with the remainder coming from asset management.
In a sign that the worst might not be over, UBS said increased volatility, rising protectionism and geopolitical tensions are still weighing on investors.
A decline in assets because of the market slump are set to hurt both wealth and asset management revenue this quarter.
UBS is struggling to reap greater profits from a merger of its two wealth management businesses, revive a flagging stock price and improve investment banking results after the departure of its top dealmaker.
It is the latest bank to suffer from the wild market swings that kept many clients on the sidelines in the final stretch of the year, after Societe Generale SA said fourth-quarter trading revenue probably dropped about 20 percent.
“These are very poor results and come as somewhat of a negative surprise so soon after the upbeat investor day,” analysts including Andrew Coombs at Citigroup wrote in a note to investors.
In wealth management “the fourth quarter is usually seasonally weak, but this is disappointing,” they added.
UBS chief executive officer Sergio Ermotti and chairman Axel Weber have overseen a pivot away from investment banking since the global financial crisis to focus on managing money for the rich.
While that strategy has been imitated by rivals, including Credit Suisse Group AG — and helped the bank become more resilient to market swings — UBS is still vulnerable to the volatility that is causing billionaires to invest less in fee-generating mandates.
“In wealth management, particularly when I look at our overall results, of course they are not up to our ambitions and our expectations,” Ermotti said in interview with Francine Lacqua.
Clients are taking a wait-and-see attitude amid the trade tensions, he said.
Profit at wealth management was US$912 million, compared with estimates of US$943 million, while the investment bank also disappointed, reporting a US$30 million profit that was just a fraction of what analysts had been expecting.
In a blow to the bank, Andrea Orcel — who had overseen rising profits at the business even as the bank reduced the amount of capital allocated to it — decided to leave UBS earlier this month.
There was some good news: The bank is targeting as much as US$1 billion in share repurchases this year after buying back US$750 million last year and said it had a net tax benefit of US$275 million.
It also said the overall economic outlook remains positive and asset prices have improved.
Ermotti was likely to face questions from analysts and investors on succession planning yesterday, a topic that has been forced into the open in the past few weeks at the world’s largest wealth manager.
Ermotti and Weber — who are publicly emphasizing the bank’s internal talent — are also privately acknowledging the need for outside executives to strengthen the executive board after recent departures, according to people with knowledge of the matter.
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