Lack of progress on the European debt crisis and economic concerns "would make further improvements in prevailing market conditions unlikely and would have the potential to continue the headwinds for revenue growth, net interest margins and net new money," Ermotti, 51, and Villiger, 71, said in a letter to shareholders today.
"Nevertheless, we believe our wealth management businesses as a whole will continue to attract net new money, as our clients recognize our efforts and continue to entrust us with their assets," they said.
Debt Charge
UBS was ranked the third-biggest wealth manager by assets under management after Charlotte, North Carolina-based Bank of America Corp. and New York-based Morgan Stanley in a survey published in July by Scorpio Partnership, a London-based provider of research and industry analysis.
UBS's earnings in the quarter were burdened by a 1.16 billion-franc charge related to the bank's own debt. The accounting charge stems from a rule that requires banks to book a loss if the price of their debt increases. The investment bank posted a pretax loss of 373 million francs compared with a profit of 833 million francs a year earlier. Excluding the charge, the unit had a pretax profit of 730 million francs.
Leadership Changes
The company said in March that Andrea Orcel, a top Bank of America dealmaker, will join in July to run the investment bank with 45-year-old Carsten Kengeter. Orcel, 48, who joined Merrill Lynch & Co. in 1992, was among the biggest dealmakers when the firm was independent, and was named chairman of global banking and markets after Bank of America acquired Merrill Lynch in September 2008.
The Italian banker, who got a reported $33.8 million in compensation for 2008, will be joining other former Merrill Lynch employees at UBS, including Ermotti, Robert McCann, 54, who heads business in the Americas, and Mike Stewart, 43, who heads the global equities business at the investment bank.
UBS was shaken by the discovery of a $2.3 billion loss from unauthorized trading in September, which resulted in the departure of CEO Oswald Gruebel, 68. Villiger plans to step down at the bank's annual shareholder meeting tomorrow after former Bundesbank President Axel Weber, 55, is elected to the board of directors.
Credit Suisse last week reported that its securities unit benefited less from the rebound in debt markets in the first quarter than U.S. competitors as the Zurich-based company accelerated the reduction of risk-weighted assets. Net income fell to 44 million francs from 1.14 billion francs in the year- earlier period after accounting charges related to Credit Suisse's own debt and costs for 2011 bonuses.