UBS reorganises management, postpones profitability target

UBS Group AG pushed back a profitability target for the third time in two years.
UBS Group AG pushed back a profitability target for the third time in two years.PHOTO: BLOOMBERG

ZURICH (BLOOMBERG) - UBS Group AG is reorganizing management and postponing a profitability target after reporting third-quarter profit that more than doubled. The shares fell.

Net income rose to 2.07 billion Swiss francs (S$2.94 billion) in the three months through September from 762 million francs a year ago, UBS said in a statement on Tuesday (Nov 3). That exceeded the 1.73 billion-franc average estimate of six analysts surveyed by Bloomberg. UBS was able to claim a tax credit of 1.3 billion francs against earlier losses, mainly in the United States.

For the third time in two years, the bank pushed back a profitability target, citing stricter capital rules at home and changes in the economic outlook and conditions. UBS now wants to achieve 15 per cent return on tangible equity by 2017. It said it will beat this year's target of a 10 per cent return and will aim for that next year as well.

The shares fell as much as 4 per cent and were trading 3.3 per cent lower at 19.36 Swiss francs at 9.35am.

"Today's results will be viewed slightly negatively," said Mr Andreas Brun, an analyst at Zuercher Kantonalbank. "This is because net new money growth is lower than expected" and the turbulence in Asia also weighed on the business.

In the management shuffle, Kirt Gardner, who is currently CFO for wealth management, was named chief financial officer. He replaces Mr Tom Naratil, who will take over from Mr Robert McCann as president of UBS Americas and Wealth Management Americas. Mr Philip Lofts, group chief risk officer, is stepping down and will be replaced by Mr Christian Bluhm, who joins from FMS Wertmanagement. Mr McCann will become chairman of UBS Americas.

"Disciplined execution and our diversified business model allowed us to deliver strong results," chief executive officer Sergio Ermotti said in the statement.

Mr Ermotti, 55, scaled back the investment bank starting in 2012 to focus more on wealth management, a business that Credit Suisse Group AG now also wants to prioritise. UBS is the world's largest wealth manager and derives the biggest chunk of income from managing money for the rich.

The investment bank swung to a pretax profit of 496 million francs, compared with an estimate of 330 million francs. Revenue from trading equities rose to 944 million francs, compared with an estimate of 916 million francs.

US banks and Credit Suisse also booked higher income from equity trading during a rocky period in stock markets as investors reacted to the prospect of a US interest rate hike and signs of a slowing economy in China.