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Bloomberg
UBS Group AG suffered a net 15.2 billion francs ($15.2 billion) in withdrawals during the final three months of last year, in part because investors moved money out of Switzerland before the government shares their data with tax authorities, a trend that’s expected to continue this year.
The bank fell as much as 3.9 percent in Zurich trading, pulling other wealth managers lower, after saying all of its money management units saw net redemptions last quarter. UBS made just 73 cents in revenue on every $100 it oversees in wealth management, the lowest in the bank’s history, according to analysts at Citigroup Inc. led by Andrew Coombs.
Pretax profit at the lender, Switzerland’s largest, more than tripled in the fourth quarter as rising interest rates and stocks boosted US wealth management and the securities unit, and UBS put less money aside for litigation. The bank said it’s on track to meet a savings target of 2.1 billion francs by the end of this year.
Profit at the wealth management division, which caters to rich clients banking outside the US, rose to
368 million francs before taxes, from 344 million francs a year earlier. The unit, led by Juerg Zeltner, saw 4.1 billion francs in net redemptions during the quarter, mainly from Asia and emerging markets, where margins are highest.
Credit Suisse Group and Julius Baer Group, the second and third-largest Swiss wealth managers, have also cited government tax programs in countries such as Brazil and Mexico as reasons for the loss of client assets last year. Both banks are scheduled to report earnings in February. UBS fell 3.4 percent at 3:27 p.m. in Zurich, paring gains in the past six months to 21 percent. Credit Suisse fell 3.3 percent and Julius Baer declined 2.8 percent.
UBS’s profit before tax rose to 848 million francs ($847 million) from 234 million francs a year earlier. Higher interest rates in the US and improved investor confidence there should help offset the impact of negative central bank rates in Switzerland and the euro region, UBS said.
‘Very Negative’
Wealth management Americas, the firm’s US brokerage, reported a pretax profit of 339 million francs, compared with 14 million francs a year earlier, as rising stock markets and higher interest rates in the US lifted earnings. The gain was driven by lower provisions for litigation and higher recurring fees and net interest income, the bank said, even as clients pulled a net $1.3 billion during the quarter.
At the investment-banking unit, led by Andrea Orcel, pretax profit rose to 306 million francs from 80 million francs a year earlier. Revenue from trading equities rose 22 percent in the quarter from the previous year, as income rose in all products. Underlying revenues from trading fixed income and currencies, adjusted for a disposal, fell as high volatility weighed on emerging market products, foreign exchange and interest rate options.
Litigation Costs
UBS, among the few European banks still facing a US probe into sales of mortgage securities, set aside 162 million francs during the quarter to cover litigation expenses, less than the 544 million francs analysts had expected. The bank has 3.2 billion francs in reserves for all legal matters, including $1.4 billion for claims related to residential mortgage-backed securities, little changed from the previous quarter. Credit Suisse and Deutsche Bank AG last month agreed to a combined $12.5 billion in settlements to end similar Justice Department probes. Royal Bank of Scotland Group Plc said that it will take a 3.1 billion-pound ($3.9 billion) charge in its fourth-quarter results for mortgage securities litigation.
“While they had lower litigation expenses than expected, the large outflows across all divisions are very negative,†said Daniel Regli, a Zurich based analyst at MainFirst.