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UBS Gives Q2 Preview, Outlines Further Changes

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UBS says it plans to announce its second quarter results that “are likely to be at or slightly below break-even,” noting that positive contributions from global wealth management, business banking and global asset management have been offset by a loss in the investment bank.

The investment firm blames market deterioration that led to write-downs and losses on previously disclosed risk positions, “in particular credit valuation adjustments on mono-line insurance exposures.” It notes, though, that “write-downs were mitigated by continued exposure reductions and by hedge benefits.”

Net new money was negative in the second quarter, a trend that “was most pronounced in April but improved in May and June.”

At the end of the present quarter, UBS says, it expects its Tier 1 capital ratio to be about 11.5 percent, with no need to raise new equity.

In the quarter ended March 31, 2008, UBS wealth-management operations in the United States included close to 8,220 advisors, down nearly 30 from about 8,250 at the end of 2007. Revenue or sales per advisor stood at 204,000 Swiss francs, down 9 percent from the prior quarter — mainly because of the 16 percent fall in the U.S. dollar, says the firm.

Net new money was 3.1 billion Swiss francs, down from 8.1 billion Swiss francs in the fourth quarter of 2007, when there were “high levels of net new money associated with the hiring of experienced financial advisors with strong client bases,” the company says. Recently, though, “net new money generation weakened towards the end of the first quarter with clients diversifying assets away from UBS due to the effects of the credit market turbulence on the firm’s operating performance and reputation.”

Income for the unit stood at 1.5 billion Swiss francs, down from 1.6 billion in the first quarter of 2007. Pre-tax profits, though, rose to 183 million Swiss francs from 155 million.

In the first quarter, UBS rolled out several technology enhancements and a redesigned client statement. It also streamlined the process for fee-based business. The number of personnel in UBS’ U.S. wealth-management operations is 19,370. It rose in early 2008 because of “increased hiring in support of the branch network and staff training functions.”

UBS recently stated that its board has begun taking steps “to restore UBS to its premier position among global banks, as announced at the annual general meeting of April 23.” There is now a clear separation of the roles and responsibilities of the board and executive management and “a strengthening of the oversight role of the board through the operation of its committees.”

The chairman’s office has been abolished, and four board members have resigned. New members should be elected in October. UBS has appointed Sergio Marchionne to be a senior independent director; the Fiat CEO also continues to serve as the company’s non-executive vice chairman.

Janet Levaux, MBA/MA, is the managing editor of Research; reach her at [email protected].


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