UBS Issues Profit Warning, Shuffles Execs

“Higher regulatory requirements mean capital ratios won’t rise as quickly as expected,” Andreas Brun, an analyst at Zuercher Kantonalbank said in a note. Expectations for the bank’s payout that are too high will have to come down, he said.

Net income rose to 2.07 billion francs in the three months through September from 762 million francs a year ago, UBS said. That exceeded the 1.73 billion-franc average estimate of six analysts surveyed by Bloomberg. UBS was able to claim a tax credit of 1.3 billion francs against earlier losses, mainly in the U.S.

“This was a very very challenging quarter,” Ermotti said in an interview Tuesday with Bloomberg TV. “Big changes in the sentiment in emerging markets, big changes in China, big changes on the geopolitical front.”

Wealth Slowdown

In wealth management, where the bank makes most of its money, trading dropped to its lowest level in four years as clients sat out the worst quarter for global stocks since 2011. Pretax income from the division fell 9.6% to 639 million francs. Analysts surveyed by Bloomberg estimated 691 million francs. Net new money in wealth management totaled 200 million francs, down from 1.8 billion the previous quarter, the lowest in at least four years. UBS asked clients to hold less cash or go elsewhere and excluding the effect of that program net new money was of 3.5 billion francs, compared to 9.8 billion a year earlier. Clients in Asia cut borrowings by “unusually high” amounts, the bank said.

“Today’s results will be viewed slightly negatively,” said Brun, the Zuercher Kantonalbank analyst. “This is because net new money growth is lower than expected” and the turbulence in Asia also weighed on the business.

The regulation will mean “lower return for shareholders,” Ermotti said. There will also be an impact on jobs, costs and ultimately on taxpayers, he said, “because we are going to make less money and we will pay less taxes.”

In the management reorganization, Gardner, who is currently CFO for wealth management, will take on the new post effective Jan. 1, UBS said in a statement. Naratil will take over from Robert McCann as president of UBS Americas and Wealth Management Americas, while Philip Lofts, group chief risk officer, is stepping down from his role and will be replaced by Christian Bluhm, who joins from FMS Wertmanagement, UBS said.