Pre-Tax Profits, Cost/Income Ratios Improve Across UBS' Wealth Business

Tom Burroughes

30 April 2013

The pre-tax profits at the wealth management arms of UBS both in the Americas and other regions of the world rose in the first three months of 2013 from the previous quarter, while new business inflows in some segments rose to pre-2008 crisis highs, the Zurich-listed banking group announced today.

At Wealth Management – the segment not including Wealth Management Americas – pre-tax profit was SFr664 million , up from SFr398 million, a 67 per cent quarterly increase; adjusted pre-tax profit was SFr690 million, up from SFr415 million.

The results will cheer UBS at a time when the firm has, along with its peers, been working to cut risk exposures at its investment banking arm and give more prominence to the wealth management side of the business. The UBS figures beat analyst estimates on higher revenues at the investment bank and in wealth management, according to Bloomberg.

The gross margin on invested assets increased 6 basis points to 91 basis points, mainly reflecting an upturn in transaction-based income. Operating expenses fell to SFr1.250 billion from SFr1.350 billion, mainly due to seasonally lower general and administrative expenses, UBS said in a statement. Net new money inflows of SFr15.0 billion “represented the highest quarterly net inflows since 2007”, it said.

The cost/income ratio decreased to 64.9 per cent from 77.3 per cent. On an adjusted basis excluding restructuring charges of SFr26 million compared with SFr17 million in the previous quarter, the cost/income ratio fell by 12.7 percentage points to 63.6 per cent from 76.3 per cent, and was within UBS’s target range of 60 per cent to 70 per cent.

Americas

Meanwhile, UBS said its Wealth Management Americas profit before tax was $251 million compared with a profit before tax of $216 million in the prior quarter. It reported a record adjusted quarterly profit before tax of $262 million in the first quarter of 2013 compared with an adjusted profit before tax of $219 million in the prior quarter.

UBS said the profit improvement reflected a 3 per cent decrease in operating expenses, mainly due to lower charges for provisions for litigation, regulatory and similar matters.

Net new money continued to be strong and improved to $9.2 billion. In US dollar terms, the gross margin on invested assets decreased 4 basis points to 80 basis points and remained within the target range of 75 to 85 basis points. The gross margin from recurring income decreased 4 basis points due to lower mutual fund and annuity fee income, while the gross margin from non-recurring income remained unchanged from the prior quarter.

The cost/income ratio decreased to 85.5 per cent from 86.8 per cent in the prior quarter. On an adjusted basis excluding restructuring charges, the cost/income ratio decreased to 84.9 per cent from 86.6 per cent and remained within the target range of 80 per cent to 90 per cent.

Group

For UBS as a whole, across all divisions, Q1 net profit, attributable to shareholders, was SFr988 million compared with a loss of SFr1.904 million in Q4 2012. On an adjusted basis, the first quarter profit before tax was SFr1.901 billion compared with a loss before tax of SFr1.165 billion in the prior quarter.

On a reported basis, profit before tax was SFr1.447 billion compared with a loss before tax of SFr1.837 billion in the prior quarter.

Operating expenses declined by SFr1.717 billion, predominantly as a result of reduced net charges for provisions for litigation, regulatory and similar matters. In the first quarter, UBS recorded a tax expense of SFr458 million, compared with SFr66 million in the prior quarter.

The firm had total invested assets of SFr2.373 trillion at the end of March 2013, a rise of SFr143 billion.