May 2, 2012 / 1:33 PM / in 5 years

UBS brokerage unit posts record 1st-quarter earnings

May 2 (Reuters) - UBS Wealth Management Americas posted record first-quarter earnings Wednesday, fueled by increased client trading and gains in securities sales.

An influx of brokers recruited from rivals also helped boost the in-flows of client money.

Quarterly pretax earnings rose 76 percent to a record $209 million, compared with the year-ago period. UBS said revenue rose 8 percent to $1.57 billion, powered by commissions, management fees, gains from the firm’s inventory of securities and an increase in interest income.

The quarterly results revealed a rebound in the firm’s ranks of financial advisers, decimated after the financial crisis and a series of legal and regulatory missteps. UBS said broker headcount rose by 48 to 7,015 during the first quarter, the firm’s largest number of brokers since the end of 2009.

The U.S. brokerage arm of Swiss bank UBS AG said the number of advisers has swelled by 204, or 3 percent, in the past year on the back of recruiting and “historically low” attrition. This hiring spree helped boost flows of new client money in the quarter to $4.6 billion, more than doubling the firm’s fourth-quarter inflows.

UBS’s in-flows exclude the reinvestment of interest and dividends. Total client assets overall rose 4 percent to $851 billion from last year.

The results mark continued improvement in a business that had been losing clients and billions of dollars of assets during the financial crisis. The unit’s latest report card still falls short of the $1 billion-a-year pretax earnings target set by unit Chief Executive Robert McCann.

UBS may be trying to recruit its way to growth, as it has in the past. It is an expensive exercise that previously sapped the unit’s earnings. In the latest quarter, expenses at the unit rose 2 percent to $1.36 billion, reflecting a 4 percent jump in personnel spending.

UBS said commitments and advances linked to recruits surged 17 percent to $168 million from the prior year, while broker compensation rose 6 percent to $579 million. Rival brokers such as Bank of America Corp’s Merrill Lynch and Morgan Stanley Smith Barney do not disclose this level of recruiting and compensation expense detail.

To offset these increases, UBS cut general and administrative costs 5 percent. That helped UBS reduce overall spending per dollar of revenue to 87 cents from 92 cents in the year-ago period.

UBS noted a single client was responsible for the withdrawal of $1 billion in assets during the quarter. A spokeswoman for the bank declined to identify the client.

Average revenue across all UBS advisers rose 3 percent to $897,000 from the fourth quarter, while client assets per adviser climbed 6 percent to $115 million. Bank of America Corp said its Merrill Lynch brokers on average generated $905,000 of annualized revenue in the first quarter.

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