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NEW YORK (Reuters) - UBS AG's UBSN.VX(UBS.N) Americas wealth management group on Tuesday reported a 21 percent jump in quarterly pre-tax profit over the prior-year period, as financial adviser productivity picked up and invested assets rose to record levels.
Second-quarter pre-tax profit at the Swiss bank's Americas brokerage operation totaled $258 million - accounting for roughly 24 percent of UBS AG's total pre-tax profit during the quarter.
"They're continuing to invest in the Americas," said Sophie Schmitt, senior wealth management analyst at Boston-based Aite Group, pointing to the firm's willingness to spend to hire top advisers whose large client asset pools generate significant revenue for UBS.
"There is a lot of competition in this market, as assets are flowing from traditional wealth management providers to online brokerages and independent registered investment advisers," Schmitt said. "Firms really need to invest."
The Swiss bank's U.S. brokerage business, formed out of the old PaineWebber brokerage and run by former Merrill Lynch wealth chief Robert McCann, said invested assets were $892 billion at the end of the second quarter, up 12 percent from last year.
Managed account assets increased to $273 billion, accounting for 31 percent of total invested assets at the end of June. Higher managed account fees off of those assets helped drive profit growth during the quarter, UBS said.
Revenue per broker at UBS Wealth Management Americas rose to more than $1 million, up 12 percent from $905,000 last year, topping adviser productivity of major competitors.
But even as profit and managed assets rose, net new money generated by existing and new UBS clients in the Americas shrank to $2.8 billion from $9.2 billion in the first quarter. The Americas region includes wealthy clients in the United States, Canada and Latin America.
UBS said the reduction in net inflows during the quarter included client withdrawals of roughly $2.5 billion associated with annual income tax payments, and a reduction in net new money inflows from its Global Family Office, which caters to the ultra-wealthy.
The Swiss bank warned that client confidence and activity levels during the third quarter could be impacted by a lack of resolve to European sovereign debt and banking system issues and U.S. fiscal issues.
"This would make improvements in prevailing market conditions unlikely," UBS said in its quarterly report released on Tuesday. "Together with the seasonal decline in activity levels traditionally associated with the summer holiday season," those factors could "consequently generate headwinds for revenue growth, net interest margins and net new money."
The firm's U.S. brokerage force grew by 34 during the second quarter to 7,099 advisers at the end of June - up 78 from last year.
On that measure UBS lags rival U.S. brokerage firms. - organ Stanley Wealth Management (MS.N) had 16,321 advisers at the end of the second quarter, while Bank of America Corp's (BAC.N) Merrill Lynch had 14,172 advisers, and Wells Fargo Advisors (WFC.N) had 15,268 advisers.
Financial adviser compensation at UBS rose 18 percent from a year ago to $690 million, while advances and other recruiting commitments added another $171 million in expenses for the quarter.
Reporting by Ashley Lau; Editing by Leslie Adler