UBS cautions gains from wealthy client activity may not
last
Send a link to a friend
[October 28, 2017]
By Joshua Franklin
ZURICH (Reuters) - A pick-up at UBS's
<UBSG.S> core wealth management business is likely to weaken in the
final months of 2017 as clients withdraw money to take part in tax
amnesty programs, the world's biggest private bank said.
UBS, which manages more than more than $2 trillion of the world's
wealth, saw continued improvement in the third quarter at its flagship
business after a sluggish 2016 in which trading activity by rich clients
hit a record low.
But finance chief Kirt Gardner said the fourth quarter, traditionally a
seasonally slow three months, would be hit by an estimated 8 billion
Swiss francs ($8 billion) in withdrawals as wealthy customers
participate in government programs to declare offshore assets.
"We would expect that after the outflows in the fourth quarter you will
see a drop-off in recurring revenue as a consequence and also reduction
in margin," he said in a call with analysts on Friday.
![](http://archives.lincolndailynews.com/2017/Oct/28/images/ads/current/elkhart_fertilizer_sda_FFARM_2017.png)
Gardner added UBS expected to see a recovery by the second quarter of
2018.
The bank, which also has investment banking, asset management, and Swiss
retail and corporate divisions, said political and monetary policy
uncertainty made it cautious too.
Third-quarter group net profit came in at 946 million francs, lagging
the average forecast in a Reuters survey of six analysts but ahead of
the Swiss bank's own poll.
UBS shares were down 1.1 percent at 1120 GMT, a steeper drop than the
European banking sector index <.SX7P>.
'EXPECTING A LOT'
Net new money inflows - a closely watched indicator of future earnings
in money management - totaled 4.6 billion francs at UBS's international
wealth management unit in the third quarter.
![](http://archives.lincolndailynews.com/2017/Oct/28/images/ads/current/best_friends_sda_120215.png)
[to top of second column] |
![](../images/102817pics/busine77.jpg)
The logo of Swiss bank UBS is seen on a branch office in Zurich,
Switzerland November 8, 2016. REUTERS/Arnd Wiegmann/File Photo
![](http://archives.lincolndailynews.com/2017/Oct/28/images/ads/current/rath_millwright_lda_FFARM_2017.png)
A bright spot for the unit was the contribution from Asia Pacific, a priority
growth region for UBS which has seen its best ever year-to-date performance.
UBS's North America brokerage business, which handles just over half the bank's
wealth management assets, saw net outflows of $2.3 billion, a blow to a business
investors hope is on an upward curve.
"The market is expecting a lot from wealth management Americas because of the
good economy and the rate increases," said Mirabaud Securities Limited analyst
Andreas Brun, who rates UBS's stock "buy".
The investment bank, which UBS has scaled back in recent years to free up
resources for wealth management, saw adjusted pretax operating profit rise 2.9
percent to 352 million francs.
UBS's common equity tier 1 (CET1) capital ratio, an important measure of balance
sheet strength which UBS uses to help decide its dividend, rose to 13.7 percent
from 13.5 percent in the second quarter. A drop in the second quarter CET1 ratio
had been a source of concern for some investors.
![](http://archives.lincolndailynews.com/2017/Oct/28/images/ads/current/loganpest_sda_FFARM_2017.png)
However, Brun said pending legal cases and the uncertainty over future capital
rules under Basel IV regulations meant it was too soon to draw conclusions for
the dividend.
"That ratio is clearly good for all those who want to make a dividend story out
of UBS," said Brun. "For me it's still too early to call it a dividend story."
(Additional reporting by Angelika Gruber; Editing by Michael Shields, Alexander
Smith and Mark Potter)
[© 2017 Thomson Reuters. All rights
reserved.] Copyright 2017 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed. |