By Andrew Welsch

UBS' Americas wealth management unit saw its profit and revenue increase during the second quarter, both positive developments. Less positive were a flow of money out of the unit and the departure of some financial advisors.

Wealth management is the Swiss bank's most important business, and the Americas unit accounts for about half of UBS' wealth management revenue.

The Americas unit's pretax profit for the quarter was $364 million, a 48% year-over-year increase. Revenue increased 6% to $2.9 billion.

The unit reported $3.5 billion in net outflows for the quarter compared with inflows of $20.2 billion during the first quarter of this year and inflows of $6.2 billion during the second quarter of 2024.

The second quarter historically is a challenging one for asset gathering because U.S. clients tend to pull money from their accounts to pay taxes in April. This year, the period was also marked by a sharp selloff in stocks because of President Donald Trump's tariffs. Stocks rebounded later in the quarter after the president delayed implementation of some of his proposed tariffs.

The Americas wealth management unit has recently lost some advisors after UBS made changes to U.S. financial advisor compensation late last year, resulting in potential pay cuts for some advisors. The company's Americas advisor head count dropped to 5,773 from 5,884 for the first quarter. The figure includes some advisors in Canada and Latin America.

Asked about advisor attrition and the impact of compensation changes, UBS CFO Todd Tuckner said the second quarter tends to be more seasonally active in terms of advisor recruiting. "And the changes we've introduced, which I think you were referring to and which I've highlighted previously, mean that we could see some continued movement across firms and to the independent channel. Having said that, we're actively recruiting, and we're also seeing more [advisors] commit to stay and retire at UBS than at any time since we've introduced this retention program several years ago."

He also said the company is investing more in its technology and tools for advisors, and those investments are paying off in terms of profit growth and improved advisor productivity.

The Americas wealth unit's pretax profit margin for the quarter was 12.4%. CEO Sergio Ermotti told analysts that UBS is focused on raising pretax profit margins to the midteens. "When I look at our U.S. operation, I think that it's fair to say that in wealth management, we are not yet where we should be in terms of profitability," he said. "But as you could see from the recent developments, we are tackling the issue. We are convinced that in the medium term, we will be able to achieve a double-digit, a midteens kind of return on pretax profit margins."

Asked whether he would entertain a "credible unsolicited bid" for the Americas wealth management business, Ermotti said, "I'm not going to go into speculations or commenting even remotely on hypothetical approaches or situations."

Shares of UBS were up 0.4% Wednesday afternoon in New York after the Swiss bank reported quarterly earnings that beat Wall Street estimates. The benchmark S&P 500 index was up 0.2%. UBS reported earnings per share of 72 cents, topping the Wall Street consensus for 68 cents, according to FactSet. Revenue came in at $11.6 billion, in line with analyst estimates.

Regulatory changes on the horizon. UBS is one of the world's largest wealth management companies, and its acquisition of longtime rival Credit Suisse in 2023 boosted its global reach. UBS's integration of Credit Suisse is on track, according to the company. UBS moved Credit Suisse client accounts booked outside of Switzerland to the UBS platform and is in the process of moving Switzerland-based client accounts to UBS.

But the acquisition, organized at the behest of the Swiss government, has provoked a political backlash against UBS. Last month, the Swiss government proposed stricter capital requirements for UBS. On the earnings call, Ermotti said the proposal was flawed and failed to recognize UBS's consistently strong capital position, risk management, and diversified business model.

"No matter how CET1 capital ratios are presented, the proposal still results in an increase of around $24 billion in capital at the parent bank," he said. "Of course, we will evaluate all potential and appropriate measures to address negative effects for our shareholders, but any mitigation strategies, even if feasible, would come at a significant cost."

UBS will engage with policymakers about the proposal. Ermotti expects the company to make no changes before 2027. "In the meantime, I'm confident that we can continue to deliver on what's within our control: serving clients, completing the integration, supporting all the communities where we live and work, and positioning UBS for long-term success for the benefits of all stakeholders," he said.

Write to Andrew Welsch at andrew.welsch@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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July 30, 2025 13:23 ET (17:23 GMT)

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