October 4, 2011

UBS Expects Modest Profit for Q3, New Client Inflows

Net new inflows of assets from wealth-management clients should be about $13 billion as of Sept. 30, according to the investment bank

UBS said Tuesday that, despite a loss of $2.3 billion related to unauthorized trading and $433 million restructuring charge tied to cost cutting, it should report a modest net profit for the third quarter of 2011 on Oct. 25.

The profit expected by UBS (UBS) is a result of roughly $1.6 billion in credit gains on financial liabilities and a gain on the sale of Treasury-related investments of about $760 million in the non-U.S. wealth management and Swiss bank units, according to a press release.

In addition, UBS expects to report net new money inflows in its wealth-management businesses “at levels broadly similar to those of the previous quarter,” it said. Global asset management, however, should report moderate net new money outflows.

Globally, UBS includes 11,065 advisors, about half of which are in the United States.

In the second quarter of 2011, UBS’ non-U.S. wealth management operations attracted $6.1 billion in net new assets. By region, the net inflows were roughly $3.4 billion in Asia, $3 billion in the emerging markets (including Latin America) and $1.6 billion in Switzerland. Outflows of $2 billion took place in Europe. And the group reported that $4.4 billion in net inflows came from ultra-high-net-worth clients.

In the United States, net new money inflows were $6.7 billion, including dividends and interest. Excluding these items, the inflows in the second quarter were $2.8 billion. (This unit is led by former-Merrill Lynch executive Bob McCann.)

“UBS’s capital position remains strong, and its capital base at the end of the third quarter of 2011 is expected to remain broadly in line with the balance at the end of the previous quarter, including the loss associated with the unauthorized trading incident,” the company said. “The BIS Basel II tier 1 capital ratio is expected to decline slightly compared with the second quarter due to the impact on risk-weighted assets of the unauthorized trading incident.”

Also, UBS says it plans to continue with further cost cutting and job reductions through 2012. “UBS will continue to invest in growth regions, including Asia Pacific, the Americas, and the emerging markets, as well as in our global wealth-management franchise,” it said in a statement.

In late September, UBS CEO Oswald Gruebel resigned. He was replaced by interim CEO Sergio Ermotti, a former-Merrill executive, prompting many recruiters to say that the U.S. operations of UBS would be likely to see more departures and weak recruiting.

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