UBS warns of headwinds as clients pull $13bn in assets

Bloomberg

UBS Group AG warned that the worst may not be over after clients pulled $13 billion in assets during a market meltdown in the final months of 2018.
Increased volatility, rising protectionism and geopolitical tensions are still weighing on investors, which will hit wealth and asset management revenue in the first quarter, the Zurich-based bank said on Tuesday. Withdrawals at the key global wealth management unit totaled almost $8 billion in the fourth quarter, with clients removing another $5 billion from asset management.
UBS fell as much as 5 percent in early Zurich trading, leading European bank stocks lower, as the results underscored the bank’s struggles to reap greater profits from a merger of its two wealth management businesses and improve investment banking results after the departure of its top dealmaker. UBS is the latest bank to suffer from the wild market swings that kept many clients on the sidelines in the final stretch of the year, after Societe Generale warned fourth-quarter trading revenue probably dropped about 20 percent.
“These are very poor results, and come as somewhat of a negative surprise so soon after the upbeat investor day,” analysts including Andrew Coombs at Citigroup wrote in a note to investors. In wealth management “the fourth quarter is usually seasonally weak, but this is disappointing.”

STILL VULNERABLE
Chief Executive Officer Sergio Ermotti and Chairman Axel Weber have overseen a pivot away from investment banking since the global financial crisis to focus on managing money for the rich. While that strategy has been imitated by rivals including Credit Suisse Group AG — and helped the bank become more resilient to market swings — UBS is still vulnerable to the volatility that has prompted clients to flee.
“In wealth management, particularly when I look at our overall results, of course they are not up to our ambitions and our expectations,” Ermotti said in a Bloomberg Television interview with Francine Lacqua. Clients are taking a wait-and-see attitude amid the trade tensions, he said.
Ermotti’s assessment contrasted with comments from his counterpart at Credit Suisse, Tidjane Thiam, who told Bloomberg in an interview that assets at his firm have been “resilient” and the bank sees no reason to change the guidance it had given at its investor day last month.
“Look, it is a very difficult fourth quarter,” Thiam said from the World Economic Forum in Davos, pointing to disappointing earnings at some of his largest rivals. “Things have gotten better since the beginning of the year.”
UBS declined 3.8 percent at 10:37 a.m., while Credit Suisse fell 0.6 percent.Profit at UBS’s wealth management was $912 million, compared with estimates of $943 million, while the investment bank also disappointed, reporting a $30 million profit that was just a fraction of what analysts had been expecting. In a blow to the bank, Andrea Orcel — who had overseen rising profits at the business even as the bank reduced the amount of capital allocated to it — decided to leave UBS earlier this year.