Swiss firm with numerous Canadian offices sees shares hit by weakening of its flagship business
On the surface it looked like a day of celebration for Swiss bank UBS as the company reported its best annual results since 2010.
However, the firm, which has bases in Vancouver, Calgary and Montreal, was rocked as an unexpected outflow of funds and weakened margins saw its wealth management business take a hit. It saw a $3.3billion new money outflow from the wealth management branch of its business, prompted by an exodus across emerging regions.
The reaction from the markets was strong and swift: shares slipped by close to nine per cent and reached their lowest levels for almost a year.
According to finance chief Kirt Gardner, clients in some major upcoming markets including the Middle East, Brazil and Russia required liquidity largely due to the sharp slip in oil prices and the ongoing economic turmoil which had taken its toll on their wealth. However, he and the company’s chief executive, Sergio Ermotti, chose to stick with the goal of three-five per cent growth across new inflows at its wealth management arm, which is seen as the company’s flagship offering. In recent years, UBS has chosen to reduce its investment banking arm and focus on wealth management, which is now responsible for more than half of its profits.
Speaking to reporters, Ermotti said that the outflow could have been avoided: but that he refused to chase business that would ultimately not be profitable over the long term.
“There is enough growth for us out there. Discipline and focus is the winning formula,” he said.
Overall, UBS enjoyed a strong 2015 as net profits reached 6.20billion Swiss francs – well ahead of the 5.75billion francs that had been predicted in a poll by Reuters.
However, the firm, which has bases in Vancouver, Calgary and Montreal, was rocked as an unexpected outflow of funds and weakened margins saw its wealth management business take a hit. It saw a $3.3billion new money outflow from the wealth management branch of its business, prompted by an exodus across emerging regions.
The reaction from the markets was strong and swift: shares slipped by close to nine per cent and reached their lowest levels for almost a year.
According to finance chief Kirt Gardner, clients in some major upcoming markets including the Middle East, Brazil and Russia required liquidity largely due to the sharp slip in oil prices and the ongoing economic turmoil which had taken its toll on their wealth. However, he and the company’s chief executive, Sergio Ermotti, chose to stick with the goal of three-five per cent growth across new inflows at its wealth management arm, which is seen as the company’s flagship offering. In recent years, UBS has chosen to reduce its investment banking arm and focus on wealth management, which is now responsible for more than half of its profits.
Speaking to reporters, Ermotti said that the outflow could have been avoided: but that he refused to chase business that would ultimately not be profitable over the long term.
“There is enough growth for us out there. Discipline and focus is the winning formula,” he said.
Overall, UBS enjoyed a strong 2015 as net profits reached 6.20billion Swiss francs – well ahead of the 5.75billion francs that had been predicted in a poll by Reuters.
