UBS Group AG’s freshly-combined wealth management unit didn’t get off to the best start.
The business, which accounts for about half UBS’s pre-tax profits, posted first-quarter earnings that missed analyst estimates. That disappointment and lower-than-expected asset-management results eclipsed a star performance at the investment bank, sending the shares down the most in three months.
Chief Executive Officer Sergio Ermotti has spent much of his tenure refocusing the bank on wealth management, shrinking investment-banking businesses including fixed-income trading.
The bank is seeking to boost efficiency and growth by combining the two wealth-management businesses into a single one known as Global Wealth Management, appointing Martin Blessing and Tom Naratil as co-heads of the business.
“First quarter results are disappointing across all divisions except investment banking and we do not expect consensus to upgrade but potentially see risks of downgrades,” Kian Abouhossein, an analyst at JPMorgan Chase & Co. said in a note to clients.
UBS shares fell as much as 4.4 percent, the most since late January, and were trading 3.4 percent lower as of 2:38 p.m. in Zurich.
Profit before tax at wealth management was 1.1 billion Swiss francs ($1.1 billion), just under the company-compiled estimates of 1.2 billion francs. Net new money of 19 billion francs was slightly less than the year-earlier number, though in line with the bank’s own targets.
“The wealth business looks a little bit on the weak side to be honest,” said Piers Brown, an analyst at Macquarie Bank Ltd. “Although net new money is strong, the margin looks a bit weaker.”
Invested assets, an important indicator of the size of client funds managed by the bank, dropped for the first time since June as currency swings from a weaker dollar left their mark. That’s because assets are worth less when translated back into the stronger Swiss franc, the bank’s reporting currency.