UBS Group AG got a boost from rich Asian clients in a quarter hit by a poor result at the investment bank and lower income from lending as interest rates have languished.
The key wealth management unit added US$15.7 billion new money in the three months through last month, most of that from Asia, helping lift assets overseen for the affluent to a record US$2.5 trillion, UBS said yesterday.
While profit beat analysts’ estimates, UBS said it would book a charge of about US$100 million in the fourth quarter to restructure the securities unit, and warned that lower interest rates would continue to squeeze income.
Photo: Bloomberg
“Market conditions in the last few quarters have been very challenging,” chief executive officer Sergio Ermotti said in an interview with Bloomberg TV.
That is particularly true for the investment bank, which is “much more skewed towards Europe and Asia” than the US, he said.
Ermotti last month hired former Credit Suisse Group AG banker Iqbal Khan to co-run the wealth management unit, positioning him as a potential successor.
However, Khan’s start at UBS was overshadowed by a spying scandal that exposed a deep rift with his former boss.
UBS was one the first banks to pivot away from investment banking and toward wealth management after the financial crisis, becoming a model for rivals, including Credit Suisse.
Still, increasing competition for rich clients, negative interest rates and a slowing economy are putting pressure on that business.
Ermotti said he asked Khan to assess the wealth management franchise and, along with cohead Tom Naratil, report back to him with ideas to improve it by December.
Khan, in a memo to employees after he started this month, pointed to “unrealized potential” within the wealth management business.
Key will be his take on developing UBS’s offering to wealthy clients in Asia, a region that was not under his control at Credit Suisse and which attracted the bulk of the inflows last quarter.
Ermotti is also making changes to the investment bank, reshuffling senior management and combining trading operations in changes that might ultimately eliminate hundreds of positions, people with knowledge of the plan have said.
The bank is cutting about 40 jobs in the Asia-Pacific region as part of the shake-up, a person familiar with the matter has said.
The restructuring should save the bank about US$90 million annually, Ermotti said in an interview with Bloomberg TV, adding that job losses would not be significant.
Adjusted pretax profit at the unit fell 59 percent from a year earlier, as the bank earned less from advising on deals as well as from trading.
Equities trading revenue declined almost 7 percent, compared with a gain of about 1 percent at the five biggest Wall Street firms.
UBS is seeking to boost collaboration between dealmakers and its wealth-management unit, while sharpening a focus on industries most of interest to its richest clients.
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