- Net income $1.05 billion; company-compiled estimate $971 million
- Operating income fell 4.6% to $7.09 billion, fourth straight drop
- Wealth management adjusted pretax profit $919 million, down 2%
- Investment bank adjusted pretax profit $203 million, down 59%
- Asset management adjusted pretax profit of $135 million, up 6%
Ermotti said Tuesday that he asked Khan to assess the wealth management franchise and, along with co-head Tom Naratil, report back to him with ideas to improve it by December.
Khan, in a memo to employees after he started this month, pointed to “unrealized potential” within the wealth management business. Key will be his take on developing UBS’s offering to wealthy clients in Asia, a region that wasn’t under his control at Credit Suisse and which contributed $10.9 billion in inflows in the third quarter. In the U.S., which is overseen by Naratil, wealthy clients stayed broadly put.
Khan joined under a cloud after it emerged that Credit Suisse had private investigators follow him to make sure he didn’t try to encourage others to defect. The scandal exploded onto the front pages of local tabloids and exposed a personal feud between Khan and his former boss, Tidjane Thiam. One of Thiam’s top lieutenants left the bank after he was found responsible for ordering the surveillance.
Trading Unit
Ermotti is also making changes to the investment bank, reshuffling senior management and combining trading operations in changes that may ultimately eliminate hundreds of positions, people with knowledge of the plan have said. The bank is cutting about 40 jobs in the Asia-Pacific region as part of the shake-up, a person familiar with the matter has said.
The restructuring should save the bank about $90 million annually, Ermotti said in an interview with Bloomberg TV, adding that job losses won’t be significant. The bank doesn’t plan to change its investment banking “footprint,” Chief Financial Officer Kirt Gardner said on a conference call. Job cuts will be broad-based and at a senior level, he said.
Adjusted pretax profit at the unit fell 59% from a year earlier, as the bank earned less from advising on deals as well as from trading. Equities trading revenue declined almost 7%, compared with a gain of about 1% at the five biggest Wall Street firms. UBS is seeking to boost collaboration between dealmakers and its wealth-management unit, while sharpening a focus on industries most of interest to its richest clients.
The asset management unit, which caters to less wealthy investors and institutions, won $24.1 billion in long-term net inflows, a bright spot for a unit that’s overshadowed by the much larger wealth management business.
UBS has had a rocky year so far. It was dealt a $5 billion penalty in a French tax case in February that it intends to appeal. After warning of a difficult market in the first quarter, it announced $300 million in additional cost cuts. Ermotti previously signaled that the bank may struggle to reach its 15% adjusted return on tangible equity capital, instead saying that the bank could achieve a level on par with last year’s 13% return.
This article provided by Bloomberg News.