ZURICH • UBS is planning job cuts to help save hundreds of millions of dollars in its wealth management business, after the Swiss bank's first-quarter net profit fell by nearly two-thirds due to wary clients investing less.
Switzerland's biggest bank and the world's largest wealth manager slimmed down its investment bank and focused more on managing the money of the world's wealthy, traditionally a more stable business, following the global financial crisis.
However, even this was not immune to rocky markets at the start of the year, which led to many banks posting sharp revenue drops as clients traded and invested less. "Overall, UBS reported a weak quarter across most segments, mainly driven by lower revenues," Vontobel analyst Andreas Venditti, who rates the stock a "buy", wrote.
UBS yesterday reported net profit for the first three months fell by 64 per cent to 707 million Swiss francs (S$999 million). Although this was roughly in line with the average estimate of 704 million francs in a Reuters poll of five analysts, it was down from 1.98 billion francs in the same quarter last year.
The profit drop was exacerbated by the year-ago period being unusually strong - UBS booked its biggest quarterly profit in nearly five years in the first quarter of last year, in part thanks to a surge in foreign exchange dealing after the Swiss National Bank axed its currency cap.
UBS' common equity tier 1 capital ratio, which the Swiss bank has set as a benchmark for its dividend, was 14 per cent, down from 14.5 per cent at the end of last year. It aims to return at least half its profits to shareholders if it maintains capital reserves equal to at least 13 per cent of risk-weighted assets under global rules, and 10 per cent when applying its own stress tests.
UBS told staff it was looking to cut costs in wealth management, which posted adjusted first-quarter pre-tax profit of 636 million francs, down from 856 million francs a year ago.
"We believe the outlook remains challenging," Mr Juerg Zeltner, who heads wealth management, told staff in a memo seen by Reuters and confirmed by the bank.
The savings will come through a streamlining of the division's back office and are part of UBS' previously announced efforts to bring down costs by 2.1 billion francs by the end of next year.