UBS advisor numbers fall amid record quarter

August 31, 2023 5:01 PM

UBS's advisor headcount fell in the second quarter of this year as the Swiss banking giant continues to work out the kinks from its acquisition of rival firm Credit Suisse in June.

Zurich-based UBS Group reported it had 8,992 advisors in its wealth management division on June 30, the end of its second quarter. That figure was down 3% from the 9,224 it had the previous year.

UBS meanwhile reported having 1,547 "relationship managers" on staff from Credit Suisse's wealth management division on June 30. Credit Suisse reported last year, when it was still an independent firm, that it had 1,940 relationship managers at the end of its 2022 second quarter.

The loss in advisor headcount did not hold UBS back. Buoyed by its purchase of Credit Suisse, the global institution reported a $29 billion profit for the second quarter, the largest quarterly profit ever for a bank. That boost was largely a result of the accounting difference between the $3.8 billion UBS paid for the acquisition and the value of Credit Suisse's balance sheet.

UBS also announced plans to reduce its total employee headcount by roughly 3,000 in Switzerland and reduce its costs by $10 billion by 2026, in part by restructuring its investment bank. UBS also plans to retire the Credit Suisse brand by 2025.

"UBS' results bring two key data points signaling a successful acquisition of Credit Suisse, a stabilizing wealth unit and the decision to retain and integrate the domestic Swiss unit enabling the bank to capitalize on its increased scale and competitive leadership in its domestic market," said Alison Williams, a Bloomberg Intelligence senior industry analyst, in a statement.

With $5.5 trillion in assets under management in all of its businesses, UBS is "the only truly global wealth manager," said CEO Sergio Ermotti in a call with analysts on Thursday.

To see the main takeaways from UBS's second-quarter earnings, scroll down the slideshow. For coverage of the firm's first-quarter earnings, click here. For a look at the results from the fourth quarter, click here.

Financials

UBS's wealth management division's operating profit was down 4% year-over-year to $1.1 billion for the second quarter. Its total revenue was up 1% to $4.7 billion, and its operating expenses were up 3% to $3.6 billion.

UBS said the increased expenses were driven by "unfavorable foreign currency effects, increases in technology expenses and personnel expenses, and integration-related expenses associated with the acquisition of the Credit Suisse Group."

The division's recurring revenue from management fees and similar sources fell by 3% year-over-year to $2.5 billion. That was driven by "negative market performance, slightly offset by the impact from net new fee-generating assets over the past year, which were primarily in lower-margin products," according to UBS.

Its Americas region wealth unit, which includes the U.S., Canada and Latin America, had total revenue of $2.54 billion, down 4% year-over-year, and $300 million in profit.

As for the old Credit Suisse, its wealth management reported an operating loss of $111 million in the second quarter. It had $323 million in net revenue and $427 million in operating expenses.

Advisors

Of the 8,992 advisors UBS had in its wealth management division at the end of the second quarter, 6,071 were in its Americas region.

That figure was down slightly from the 6,139 advisors the Americas region had on staff at the end of the second quarter of 2022. UBS saw no net headcount gains in any of its regions. Its tally for its EMEA region — parts of Europe excluding Switzerland, as well as parts of the Middle East and Africa — fell to 1,351 from 1,445 year-over-year.

UBS's compensation costs for advisors licensed to provide advice in the Americas were down 1% year-over-year to $1.1 billion in the second quarter. Those expenses, according to UBS, consisted of both cash and deferred compensation awards. The firm also reported having $1.75 billion worth of outstanding recruitment loans to financial advisors.

Assets

UBS's wealth management division reported an 8% year-over-year increase in its invested assets of slightly more than $3 trillion. That result, according to the bank, was driven by a strong performance in U.S. markets, net inflows of $16 billion and a $5 billion boost from beneficial foreign currency rates.

CEO Ermotti said the inflow for the second quarter was the biggest the bank has seen in more than a decade and has been further boosted by inflows of more than $8 billion so far in the third quarter.

"It is encouraging and rewarding to see the franchise stabilize so quickly," he said on a call with analysts. "Winning back the more than $200 billion of client assets that left Credit Suisse over the past year won't be easy. But recapturing as much as we can is one of our top priorities."

UBS reported nearly $1.4 trillion in fee-generating assets, an 11% year-over-year increase. UBS reported an average return of 76.7 basis points on these assets, down from 79.6 basis points in the same quarter a year ago. A basis point is equal to one-hundredth of a percent.

Credit Suisse's former wealth management division reported $530 billion in assets under management and $800 million in net new assets for the quarter.

Comment

UBS has plans to designate about $17 billion from its and Credit Suisse's wealth and management businesses as "noncore, legacy" holdings that will eventually be sold to provide further stability following the merger. Of the $279 billion that's to go into the pot, $131 billion is coming from Credit Suisse's former investment bank.

Ermotti said wealth and asset management holdings that will eventually be up for sale will consist of "selected assets" that "are not aligned with our risk appetite or strategy."