UBS' Americas wealth management unit reported yet another quarter of sluggish growth.
Pre-tax profits continued to drop, this time by 14% to $205 million from 238 million for the year-ago period, according to the firm's quarterly earnings report. The firm also reported a 1% drop to $268 million in the first quarter of 2015.
Meanwhile, the firm reported that revenue was up 3% year over year, rising to $1.947 billion from $1.898.
The firm's total operating income was also up 3% year over year to $1.947 billion on the quarter from $1.901 billion a year earlier. However, operating expenses increased 5% to $1.74 billion from $1.66 billion for the year-ago period, according to the firm.
Transaction-based income slipped 8% year-over-year to $425 million from $464 million, the firm says.
Declines in full-time financial advisors continued at UBS, a developing trend as seen in previous quarters. Advisor headcount dropped to 6,948 from 6,982 for the previous quarter. It was down from 7,119 in the year-ago period, according to the firm.
Compensation commitments continued to rise, jumping 2% to $188 million from $184 million, the firm says.
Recruiters say the declines show the wirehouses continue losing advisors at a faster rate than then can replace them. Bill Willis of Willis Consulting, a Los Angeles recruitment firm that places Merrill Lynch advisors says more training may help. "Wells Fargo and Merrill Lynch both have active training programs, and so they grow organically. UBS and Morgan [Stanley] don't," he says.
But Willis says it may be too late to slow down the declines.
"Brokers kind of talk with their feet, and recruiting ebbs and flows," he says. "I don’t' think there's any special medicine or magic they can bring to make things better for themselves. This is a problem for all of the wireshouses."
SLIGHT GLOBAL PROFIT
By comparison, UBS' global wealth management unit grew by the smallest amount in more than four years in the second quarter as Chief Executive Officer Sergio Ermotti pushes out less lucrative clients to protect margins.
Clients added 1.8 billion francs ($1.9 billion) of net new money in the period, the least since the fourth quarter of 2010, the Zurich-based firm said. Ermotti, 55, who has made expansion of wealth management at the expense of the investment bank his priority, faces a squeeze on margins by negative interest rates. Growth in funds at the unit lagged behind that of its smaller Swiss rival Credit Suisse Group AG, as it shifted clients to different products, a move that may reduce reduce assets by a further 4 billion francs this quarter.
In all, UBS reported second-quarter profit rising 53% to 1.21 billion Swiss francs ($1.26 billion) from 792 million francs a year earlier. That exceeded the 915 million-franc average of three analyst estimates compiled by Bloomberg. Equity trading revenue rose to the highest in three years.
Ermotti said he’s confident UBS will pay at least 50% of profit to shareholders for a second year.
The bank also plans to distribute a special dividend of 25 Swiss centimes a share, he said in an interview Monday with Bloomberg TV’s Manus Cranny.
“I think it’s going to happen late this quarter,” he said. The payout, first promised more than a year ago, is the result of a legal restructuring that will reduce the bank’s capital requirements.
Bloomberg's Jeffrey Voegeli and Cindy Roberts contributed to this story, with assistance from Manus Cranny.
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