July 26, 2011 / 7:28 PM / 7 years ago

UBS says profitable U.S. brokerage unit not for sale

TORONTO (Reuters) - The North American brokerage arm of UBS AG (UBS.N) UBSN.VX said on Tuesday that its second-quarter earnings benefited from higher fee and interest income, and that, contrary to ongoing chatter, the unit is not for sale.

UBS said that, overall, sluggish markets and a soaring Swiss franc hurt its results and that it would be cutting costs across all divisions over the next two to three years. UBS will likely book “significant restructuring charges” later this year.

The bank said it would keep investing in growth areas and would not cut client advisers in its core wealth management unit.

UBS Chief Executive Oswald Gruebel said he believes the Swiss bank must have a leading wealth management business in the Americas, Asia Pacific, Europe and Middle East regions, as they represent the greatest opportunities for growth.

“Our wealth management business in America is not for sale,” Gruebel said on a call with analysts. “And I only say that because these rumors keep coming up lately.”

A few months ago, Wells Fargo was tipped as a likely buyer of the unit, which had suffered billions in outflows of client funds through 2010 following massive credit losses and accusations by U.S. authorities that its parent was helping some rich Americans dodge their taxes.

Pretax profit at UBS Wealth Management Americas was $165 million in the latest quarter, ended June 30, compared with a loss of $61 million a year earlier, when it recorded restructuring charges amid layoffs and branch closures.

Revenue rose 12 percent from a year ago to $1.51 billion.

UBS said that in U.S. dollar terms, its fee and interest income increased, while interest and transactional and trading income decreased, reflecting growth in fee-based accounts, but lower trading activity.

Total client assets at the smallest of the four big U.S. brokerage houses rose 23 percent to $774 billion, not including the impact of the soaring Swiss franc.

On June 30, it cost $1.19 to buy one Swiss franc. A year earlier, it cost 93 cents.

UBS said its U.S. brokerage clients added about $7.9 billion of net new money, including dividends and interest, down 6 percent from the first quarter of 2011, as annual client income tax payments were a drain.

Net recruiting of financial advisers was the main driver of net new money in the second quarter. UBS Wealth Management Americas, led by Chief Executive Robert McCann, said it added 51 financial advisers in the quarter, for a total of 6,862. A year earlier, it had 6,760.

“The number of financial advisers has increased gradually over the past four quarters, reflecting new and experienced financial adviser hiring, and attrition rates that have improved to near record lows,” UBS said.

Invested assets per adviser in the latest quarter were $113 million, up 1 percent from the first quarter, and up 20 percent from a year ago, while revenue per adviser was $884,000, up 3 percent from last quarter and up 12 percent from a year earlier.

UBS said operating expenses at the unit were up 1 percent excluding the effect of currency translation, and that financial adviser compensation was up 2 percent in U.S. dollar terms due to higher revenue production.

Shares of UBS ended down 2.88 percent in Zurich.

Editing by Dave Zimmerman and Rob Wilson

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