UBS AG, Switzerland’s biggest bank, still sees a “challenging environment” for its wealth management business as clients remain reluctant to invest on a large scale, Chairman Axel Weber said.
“Our clients have started to be a bit more active, but the current period is still one where risk-off has come back,” Weber said in an interview with Bloomberg Television’s Francine Lacqua today. “Our clients haven’t really made a big move to be back in the market and that’s why it’s still a challenging environment.”
Profitability at UBS’s wealth management unit, which oversees assets of 821 billion francs ($865.6 billion) outside of the Americas, is under pressure as clients prefer to hold cash rather than invest the money. At the end of 2012, 28 percent of the assets managed on an advisory basis were in cash, Chief Financial Officer Tom Naratil said last month.
The gross margin at the wealth management division, which reflects how much the bank makes in revenue on assets it oversees, fell to 85 basis points in the fourth quarter from 88 basis points in the third. A basis point is equivalent to a hundredth of a percentage point.
UBS said in July while presenting second-quarter results, when almost 31 percent of advisory assets were in cash, that it would expect to see a 6 basis-point boost to gross margins from a “modest return of client risk appetite.” The bank targets gross margins of 95 basis points to 105 basis points.
Weber said in the interview he expects periods of “risk-on risk-off” in the markets to continue.