UBS Wealth Management Americas remained on track despite taking a hit from the failure of a Puerto Rico bond fund and a drop in client trading, the firm said in its third-quarter earnings announcement.
The division suffered a $17 million trading loss and a $21 million credit loss related to declines in the Puerto Rico municipal market, UBS reported. Transaction revenue also declined as profit fell 11% from the previous quarter to $218 million but remained up 32% year-over-year.
The third quarter of 2013 was adversely affected by lower client activity, trading losses and credit loss expenses related to the Puerto Rico municipal market and a charge related to the partial settlement of a previously discontinued U.S. defined benefit pension plan, the firm wrote in a statement on earnings.
Still, the Americas division remained within target ranges, executives Sergio Ermotti, the group chief executive, and Axel Weber, the chairman of the board, said. The gross margin on invested assets, which is a measure for revenue brought in from assets under management, declined only two basis points from last quarter to 78 basis points.
The unit achieved record invested assets of $919 billion, up 3% from the previous quarter and up 10% from the third quarter of 2012. Recurring income, which includes fees and net interest income, increased 29% from the year-ago quarter to almost $1.33 billion. Loans to wealth management clients also increased by 16% from last year.
That growth was offset by lower transaction revenue, however, as fee and commission income dropped 3% in the quarter and average productivity per advisor slipped back below the $1 million mark to $994,000.
Net new assets missed the target growth range, the firm said. UBS Wealth Management Americas brought in $2.1 billion in net new assets, down from $2.8 billion in the second quarter primarily due to the joining of new recruits with smaller books of business.
Approximately 12% of the divisions $1.5 billion total operating expenses went toward compensation incentives including upfront loans and bonuses that were given to recruited financial advisors, the firm said.
UBS Wealth Management Americas increased its total advisor headcount by 105 from 7,032 advisors in the third quarter last year to 7,137.
Overall, UBS Wealth Managements earnings fell 4.6% to 555 million swiss francs due to lower trading activity, the firm said.
For more firm-wide results, click here.