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Lending to wealthy clients boosts UBS's wealth business

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It was a difficult time for a wealth management company. The market is slumping this year, and fees collected on assets supervised by wealth managers are also falling. But there is a bright spot for the biggest players in the industry. It’s a loan to a wealthy customer.

Some wealth managers report a surge in net interest income in the second quarter, thanks to rising interest rates and stable demand for securities-based loans, mortgages, and other lending products.

UBS

Genre Cacola / Bloomberg

UBS
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The latest major wealth management company to report revenues said on July 26 that its global wealth management business’s net interest revenues reached $ 1,268 million, up 24% year-on-year. The increase in the US wealth management sector was even greater.

The surge in net interest income helped offset the decline in commission base and transaction revenues of UBS’s Global Wealth Management business. Unit revenues were down 2% to $ 4,677 million in the quarter.

Other wealth managers have reported similar increases. for example,

Bank of America

Wealth management, including Merrill Lynch, recorded record revenues in the second quarter, with net interest income jumping 33% year-on-year.

Goldman Sachs

Consumer and wealth management reported a 23% surge in private banking and lending annually.

UBS, like its competitors, has endeavored to go beyond investment to meet the financial needs of more clients. The company’s Americas business reported $ 3.8 billion in net new loans quarterly.

UBS is also focused on serving high net worth and equity clients. The number of advisors to the company’s Americas operations is declining, dropping from 6,199 in the previous quarter to 6,139 in the second quarter.

Assets in the Americas business fell from $ 1.772 trillion in the previous quarter to $ 1.569 trillion in the previous quarter, but assets increased from $ 1.369 trillion in the year-ago quarter, according to the company’s earnings report. The unit reported a net outflow of assets that generated $ 3.5 billion in commissions quarterly.

“The second quarter has been one of the most difficult times for investors in the last decade,” UBS CEO Ralph Hammers said in a statement. “Inflation continues to be high, the war in Ukraine continues, and so does the strict Covid policy in parts of Asia.”

Banks also reveal that they are one of several companies facing regulatory investigations by the Securities and Exchange Commission and the Commodity Futures Trading Commission on employee use of private messaging apps and company records management requirements. I made it. “The SEC and CFTC are investigating UBS and other financial institutions regarding compliance with record keeping requirements related to business communications transmitted over unauthorized electronic messaging channels,” UBS cooperated with the investigation. I added that there is. Earlier this month

Morgan Stanley

He said it would cost $ 200 million in connection with employee use of unapproved personal devices and regulatory investigations into the company’s records management requirements.

Hammers said accounts managed separately on the US and UBS digital platforms continue to attract influx, and the company continues to see opportunities.

Earlier this year, UBS announced that it would acquire robo-advisor Wealthfront to accommodate large wealthy investors. The company recently hired Norleen Hassan, who will replace Tom Naratil, as president of UBS’s American division. Naratil is Co-Head of Global Wealth Management at UBS and President of the Bank of Switzerland’s Americas business. He will resign on October 3rd.

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

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