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As UBS’ Profits Fall, Wealth Unit’s New Assets Soar

By Janet Levaux

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On Wednesday, UBS (UBS) reported a steep drop in first-quarter net profits versus the year-ago period, but a sharp jump in net new money across its wealth-management operations compared with the final quarter of 2012.

Its net income was 827 million Swiss francs ($906 million) in the first quarter of 2012 compared with 1.8 billion Swiss francs ($2.0 billion) a year ago and 319 million Swiss francs ($349 million) in the fourth quarter. The first quarter included an own-credit loss on financial liabilities designated at fair value of close to 1.2 billion Swiss francs ($1.3 billion), the company said, “primarily reflecting the tightening of our credit spreads over the quarter.”

“We improved operational performance across all our businesses, strengthened our leading capital ratios further, reduced risk-weighted assets and remained vigilant on costs,” said UBS Group CEO Sergio P. Ermotti (right), in a statement. “The strong net new money inflows in our wealth-management businesses provide further clear evidence of the trust our clients place in UBS.”

Net new money in the wealth-management businesses worldwide was 10.9 billion Swiss francs ($11.9 billion). Outside the U.S., the unit’s pre-tax profit rose about 70% to 803 million Swiss francs ($880 million), and “net new money more than doubled [from the previous quarter] to 6.7 billion Swiss francs [or $7.3 billion] on strong inflows in Asia Pacific, emerging markets and Switzerland, as well as globally from ultra-high-net-worth clients,” UBS stated.

Wealth Management Americas reported a record pre-tax profit jump of 34% to $209 million vs. last year, as net new money more than doubled from the previous quarter to $4.6 billion; it was $3.9 billion a year earlier.

Net new money in the Americas unit, which is led by Bob McCann (left), including income from interest and dividends—a measure widely used by other wirehouse firms—was $9.3 billion vs. $8.6 billion in the earlier quarter and $8.5 billion a year ago.

The number of UBS advisors in the Americas rose to 7,015 as of March 31 from 6,967 on December 31 and 6,811 a year before.

The advisors had total client assets of $851 billion in the first quarter of 2012 vs. $795 billion in the fourth quarter of 2011 and $818 billion in the first quarter of 2011.

The company says that annualized net new money growth for the first quarter was 2.4% vs. 1.2% in the fourth quarter and within the target annualized net new money growth rate of 2% to 4%. “Net recruiting of financial advisors contributed most of the inflows this quarter, while financial advisors employed with UBS for more than one year contributed to a lesser extent,” UBS said in its quarterly statement.

The first quarter also included outflows of $1 billion from a single client.

Recurring income was $980 million in the first quarter, down slightly from $1.02 billion in the previous quarter but up from $905 million a year ago.

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Read full coverage of AdvisorOne’s Q1 2012 earnings season.

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