(Bloomberg News) UBS AG, Switzerland's biggest bank, attracted more funds from wealthy clients in the first quarter than analysts estimated, sending the company's shares to the biggest advance in three months.
UBS jumped as much as 6.7 percent in Zurich trading after saying its wealth management units attracted 10.9 billion Swiss francs ($12 billion) in net new funds, more than the 8.8 billion-franc estimate of analysts surveyed by Bloomberg.
"I'm very impressed," said Ralph Silva, a strategist at Silva Research Network, in an interview on Bloomberg Television today. "UBS has done an incredible job over the past few years. It's an incredible feat, if you consider how poor the UBS brand was a mere 12 months ago."
Chief Executive Officer Sergio Ermotti and Chairman Kaspar Villiger said that the unresolved sovereign-debt crisis in Europe and questions over the economic and market outlook may restrain growth in new money and revenue in the coming quarters. UBS is shrinking its investment bank by almost half to focus more on business with wealthy customers.
UBS rose 5.5 percent to 11.95 francs by 10:37 a.m., the biggest gain since Jan. 19. The stock's 6.9 percent advance this year compares with a 5.2 percent gain in the 43-company Bloomberg Europe Banks and Financial Services Index and a 1.8 percent decline at Credit Suisse Group AG, its biggest Swiss competitor.
Net income in the first quarter fell 54 percent to 827 million francs from 1.81 billion francs in the year-earlier period, after a charge related to the company's own debt led to a loss at the investment bank. Profit surpassed the average estimate of 810.9 million francs in a survey of nine analysts.
Wealth management profit rose 24 percent to 803 million francs, helped by a reduction in expenses related to changes in the company's Swiss pension plan, while wealth management Americas increased earnings 71 percent to 190 million francs.
UBS managed 1.5 trillion francs in assets for wealthy clients at the end of March. The company, which posted the biggest loss in Swiss corporate history in 2008, saw net inflows resume in the third quarter of 2010 after customers pulled a net 233.7 billion francs in the 10 prior quarters.
"The improved net new money inflows, especially from Switzerland and emerging markets, show that confidence has returned to the bank and profitability is improving," Teresa Nielsen, an analyst at Vontobel Holding AG, said in a note. "The bank is well capitalized to withstand potential economic shocks."
'Headwinds' For Growth
The bank's Tier 1 capital ratio rose to 18.7 percent at the end of March from 15.9 percent at the end of 2011. UBS said in November it intends to cut risk-weighted assets at the investment bank by 145 billion francs from 300 billion francs by 2016, under Basel III rules. Risk-weighted assets at the investment bank were cut by about 21 billion francs in the first quarter.