UBS sends message to wealthy clients
In rushing out the early announcement of a first quarter pre-tax profit of SFr2.5 billion, UBS chief executive Oswald Grübel clearly hopes to persuade anxious shareholders gathering for April 14th’s annual meeting that his turnaround of the bank is well underway.
The consensus among many analysts covering the bank was that it would report just under SFr2 billion for the first quarter of the year, so this is a welcome sign of gathering momentum. Efforts to rebuild the fixed income and credit trading businesses are clearly bearing fruit.
Grübel is desperate to win over another audience as well. He explained to Euromoney in advance of last quarter’s results that the outflows of private client money that have bedevilled UBS will only slow when the bank returns to profitability. Grübel’s view is that wealthy clients don’t like being customers of a bank that isn’t making a profit. (See Euromoney interview).
For now, while the outflows from the private bank have slowed from their peak last year, it’s difficult to present continuing client defections as good news. UBS is trying though. The bank suffered SFr33 billion of net outflows from its core wealth management business in the final quarter of last year, a number boosted by a one-off tax amnesty for Italians. For the first quarter of 2010 analysts had feared continuing net outflows of around SFr20 billion. So they were pleased to see the actual number come in at just SFr8 billion.
If Grübel is right, that rate will decline further as long as the bank continues a sustained profit recovery. Time will tell if the bank’s wealthy private clients are re-assured by the ability of UBS’s fixed income traders to wring profits from the volatility around European government bonds amid the awkward progress of the Greek bailout.
US clients don’t seem terribly impressed just yet. In its large US private banking business the reduction in client outflows across the first quarter of this year was narrower. They withdrew a net Sfr7 billion, down from Sfr11 billion in the final quarter of 2009.
Legendary troubleshooter Oswald Grübel has had a tough first year at UBS, trying to mend the bank’s tattered reputation and staunch the outpouring of client money. But his biggest challenge may be convincing the markets that his methods are working.
Grübel says return to profit is just the start for UBS
February 9, 2010