UBS has reported strong fourth quarter and 2011 net new money flows in its wealth management businesses, evidence that dealing with its cross-border tax issues with US regulators in 2009 may now be paying off.
UBS’s combined wealth management and wealth management Americas units added more than CHF50bn ($55bn) in net new assets in 2011, increasing to CHF35.6bn from a CHF18.2bn outflow the previous year.
The world’s third-largest wealth manager settled its dispute with US authorities in 2009, paid a $780m fine and disclosed accounts worth $18bn.
Up to 11 other Swiss private banks, including Julius Baer, are now under the US regulator’s spotlight.
Wealth management pre-tax profit up 16%
Although UBS’s group net profit dropped 44% to CHF4.2bn for 2011, its wealth management division cushioned the drop. The bank recorded a pre-tax profit up 16% in its wealth management division to CHF2.7bn.
In comparison, pre-tax profit at Julius Baer dropped by 21% to CHF474m in 2011 as the Swiss bank acknowledged it was in ongoing discussions with US tax authorities on its now closed cross-border services to US clients.
Strong net inflows into UBS’s wealth management business came from Asia-Pacific (CHF11.8bn), emerging markets (CHF10.8bn) and globally from ultra high net worth (UHNW) clients (CHF24.4bn).
Assets under management (AuM) at Switzerland’s largest wealth manager, when its two wealth management divisions are combined, remained flat.
At the end of 2011, invested assets – the most commonly quoted figure for AuM at UBS – were CHF1,459bn compared with CHF1,457bn last year.
Fourth quarter pre-tax profit slump
On a quarterly basis, wealth management’s pre-tax profit plummeted to CHF471m from CHF888m in the previous quarter.
This steep drop was due to the CHF433m profit from the sale of treasury-related investments the wealth management and Swiss bank division booked in the third quarter.
Net new money inflows for the wealth management arm amounted to CHF3.1bn in the fourth quarter, again helped by gains from Asia-Pacific, emerging markets and UHNW clients.
Wealth Management Americas’ pre-tax profit declined to CHF114m from CHF139m in the third quarter.
Net new money also decreased CHF1.9bn compared with CHF4bn in the previous quarter.
The bank foresees a tough first quarter due to the economic crisis which “would weigh on overall results for the coming quarter, most notably in the investment bank”, the bank admitted.