Jul 30 2016 19504 1UBS Wealth Management

Jul 30 2016 19504 1UBS Wealth Management

UBS Group AG’s U.S. wealth-management business was slowed by volatile markets as muted client activity dragged down second-quarter operating income, but lower spending helped boost the unit’s profit.

The UBS unit on Friday reported $1.92 billion in second-quarter operating income, down 1% from the year-earlier period. The Swiss bank attributed the decline to lower income from client transactions, as well as a drop in recurring fees. Its profit before tax, however, rose 18% to $242 million.

The wealth unit’s spending on litigation and regulatory matters declined in the second quarter, helping to offset the income drop. And while UBS’s spending on recruitment of advisers jumped 13% from last year to $3.2 billion in outstanding recruitment loans, lower compensation for its adviser force tied to client activity helped offset that.

And going forward, UBS expects to incur lower recruitment costs after a spending spree earlier this year when it hired dozens of brokers from Credit Suisse Group AG’s U.S. private-banking arm. That hiring came despite an exclusive recruiting arrangement struck between Credit Suisse and Wells Fargo & Co. in October after Credit Suisse disclosed plans to wind down its U.S. private bank. An arbitration case over the matter with Wall Street’s self-regulator, the Financial Industry Regulatory Authority, is pending, according to a person with knowledge of the matter.

The unit’s aggressive recruitment tactics gave UBS the breathing room it needed to cut its recruitment efforts significantly—the first such step taken by a major U.S. brokerage. The step back from recruiting was part of a broader restructuring of its U.S. wealth unit that included cuts to its management ranks.

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Dated: July 30th 2016
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