UBS wealth management outflows take shine off profit jump

A surprise outflow of funds and weakening margins at UBS's (UBSG.VX) flagship wealth management business overshadowed Swiss bank's best annual results since 2010 and the next than expected dividend payout.

The bank's shares fell nearly nine % on weekday to their lowest in virtually a year once it rumored a fourth-quarter web new cash outflow of three.4 billion Swiss francs ($3.3 billion) at its wealth management arm, as AN exodus from rising markets and Europe offset inflows from Asia and European nation.

Finance chief Kirt Gardner aforementioned some massive shoppers in markets like Russia, the center East and Brazil - several of them within the energy sector - had required liquidity amid economic turmoil and plunging oil costs, so had swayback into their wealth.

But he and Chief government Sergio Ermotti stuck to the bank's goal of 3-5 % growth in web inflows of recent cash at the wealth management arm, that UBS has created its pillar.

UBS has reshaped its strategy within the wake of the worldwide money crisis, slimming down its investment bank and focusing a lot of on its wealth management business, that currently accounts for over 1/2 its operative profit and is that the world's largest.

The strategy has been paying off. Its stock rose fourteen % in 2015, outpacing a flat European bank sector index .SX7P.

But market ructions have showed few banks ar resistant to riotous times once made shoppers go back to the sidelines, depressing revenue at banks like UBS that trade for them.

Ermotti told reporters UBS might have avoided the outflow however selected to not chase business that might be unprofitable within the long-run.

"There is enough growth for U.S.A. out there. Discipline and focus is that the winning formula," he said.

Ermotti aforementioned headwinds from volatile markets in early 2016, and therefore the relative strength of Swiss monetary unit, meant it had been too early to create revenue forecasts this year.

But the bank can persist with its conceive to invest a lot of in its Chinese business and double its variety of shoppers there, despite the country's speed economic process and wild gyrations in its stock exchange.

STRONG 2015

Net profit at Switzerland's biggest bank advanced to six.20 billion Swiss francs in twenty15, topping the five.75 billion francs analysts had forecast in a very Reuters poll.

Fourth-quarter earnings of 949 million francs simply beat expectations, however was flattered by happening factors.

The bank planned raising its 2015 dividend to zero.85 franc per share, as well as a special payout of zero.25 francs, simply

previous analysts' forecasts.

It was the second consecutive year of a special payout, however executives aforementioned investors shouldn't get accustomed them. The special payout for 2015 hinged on gains from postponed tax assets that ar unlikely to be as massive within the years ahead.

The bank revived its pledge to pay quite 1/2 earnings to shareholders.

UBS's sturdy earnings have bucked the trend at the most of its European peers, several of that path Swiss bank once it involves overhauling their investment banks. Rival Credit Suisse, within the interior of this method, reports results on Th.

"UBS may be a well restructured bank however isn't resistant to AN Asia delay in our read," JPMorgan Cazenove analysts wrote in a very analysis note, keeping a neutral rating on the stock.

UBS aforementioned it saw low levels of consumer activity and pronounced risk aversion within the fourth quarter, once it engaged a web tax break of 715 million francs due to revaluing postponed tax assets.

Regulatory prices can stay a burden, it said.

UBS stock had been commerce at around eleven times 12-month forward earnings, a small premium to rival Credit Suisse however a reduction to Julius Baer, consistent with StarMine, that weights analyst estimates by their previous foretelling accuracy.