Wealth Manager UBS Suffers Huge Withdrawals

Wealth Manager UBS Suffers Huge Withdrawals


UBS Group (NYSE:UBS) warned that the worst may not be over after clients pulled $13-B in assets during a market correction in the last 3 months of Y 2018.

Increased volatility, rising protectionism and geopolitical tensions are still weighing on investors, which will hit wealth and asset management revenue in Q-1, the Zurich-based bank said Tuesday.

Withdrawals at the Key global wealth management unit totaled almost $8-B in Q-4, with clients removing another $5-B from asset management.

The poor results underscored the bank’s struggles to reap greater profits from a merger of its 2 wealth management businesses and improve investment banking results after the departure of its top deal-maker.

UBS suffered from the wild market swings that kept many clients on the sidelines in the final Q of the year.

In wealth management Q-4 is is usually seasonally weak due to lack of M&A action but UBS results were very disappointing.

CEO Sergio Ermotti and COB Axel Weber have overseen a pivot away from investment banking since the global financial crisis to focus on managing money for the rich.

While that strategy has been imitated by rivals including Credit Suisse Group (NYSE:CS), and helped the bank become more resilient to market swings, but UBS is still vulnerable to the volatility prompting clients to leave.

“In wealth management, particularly when I look at our overall results, of course they are not up to our ambitions and our expectations,’ CEO Ermotti said. Clients are taking a wait-and-see attitude dues to the trade tensions, especially between the US and EU that are ominous, he said.

Mr. Ermotti’s assessment contrasted with comments from his counterpart at Credit Suisse, Tidjane Thiam, who said that assets at his firm have been “resilient” and the bank sees no reason to change the guidance it had given at its investor day last month.

“Look, it is a very difficult Q-4,” CEO Thiam said from the World Economic Forum (WEF) in Davos, pointing to disappointing earnings at some of his largest rivals. “Things have gotten better since the beginning of the year.”

Profit at UBS’s wealth management was $912-M, compared with estimates of $943-M, while the investment bank also disappointed, reporting a $30-M profit that was just a fraction of what analysts had been expecting.

Some good news

The bank is targeting as much as $1-B in share repurchases this year after buying back $750-M in Y 2018 and said it had a net tax benefit of $275-M. It also said the overall economic outlook remains positive going forward, and asset prices have improved.

HeffX’LTN’s overall technical outlook for UBS is Neutral to Bearish.

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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