UBS wealth management outflows take shine off profit jump
By Michael Shields
ZURICH (Reuters) - UBS reported a surprise outflow of funds from its flagship wealth management business on Tuesday, overshadowing its best annual results since 2010 and a higher than expected dividend payout.
The Swiss bank's shares fell 8 percent to hit their lowest in almost a year after it reported a fourth-quarter net new money outflow of 3.4 billion Swiss francs (2.29 billion pound) at its wealth management arm, as an exodus from emerging markets and Europe offset inflows from Asia and Switzerland.
Chief Executive Sergio Ermotti said volatile markets in early 2016, and the relative strength of the Swiss franc, meant it was too early to make revenue forecasts this year.
But he said the bank was sticking with its plan to invest more in its Chinese business and double its number of clients there, despite the country's slowing economic growth and wild gyrations in its stock market.
"Clearly we have to manage these next few quarters of volatility in China but the trend remains intact," he told an analyst conference call.
Ermotti said the bank was keeping its general annual goal of 3-5 percent net new money at its wealth management business despite the fourth-quarter outflow.
UBS has reshaped its strategy in the wake of the global financial crisis, slimming down its investment bank and focussing more on wealth management, which now accounts for in excess of 50 percent of its operating profit.
STRONG 2015
Net profit at Switzerland's biggest bank advanced to 6.20 billion Swiss francs in 2015, topping the 5.75 billion francs analysts had forecast in a Reuters poll.
Fourth-quarter net profit of 949 million francs easily beat expectations, but was flattered by one-off factors.
The bank also proposed raising its 2015 dividend to 0.85 Swiss franc per share, including a special payout of 0.25 francs, just ahead of analysts' forecasts.
UBS's strong earnings have bucked the trend at most of its European peers, many of which are trailing the Swiss bank when it comes to overhauling their investment banks. Rival Credit Suisse, in the midst of this process, reports results on Thursday.
"UBS is a well restructured bank but is not immune to an Asia slowdown in our view," JPMorgan Cazenove analysts wrote in a research note, keeping a neutral rating on the stock.
UBS said it saw very low levels of client activity and pronounced risk aversion in the fourth quarter, when it booked a net tax benefit of 715 million francs thanks to revaluing deferred tax assets. It had quarterly provisions of 365 million francs for litigation and regulatory matters.
"Negative market performance and substantial market volatility since the start of 2016, low interest rates and the relative strength of the Swiss franc, particularly against the euro, continue to present headwinds," it said in its outlook.
Regulatory costs would remain a burden, it said, adding: "We will continue to execute the measures we announced to mitigate these effects as we work towards our financial targets."
UBS stock trades at around 11 times 12-month forward earnings per share, a slight premium to rival Credit Suisse but a discount to Julius Baer, according to StarMine, which weights analyst estimates by their previous forecasting accuracy.
(Reporting by Michael Shields; Editing by Maria Sheahan and Mark Potter)
