The private bank stayed in the black in the first-half, though gross earnings fell 54% to $155m. It also has attracted $3.7bn worth of net inflows of capital from private clients.
In July, UBP reaffirmed its commitment to hedge funds through two high profile appointments to its alternative investment arm. Sarah Sprung is leaving Fortress Investment Group to join the Geneva private bank as chief investment officer of alternative investment. In addition, Jonathan Morgan is joining as head of research in alternative investment from Barclays Global Investors where he was head of the hedge fund management group.
Total AUM was $76 billion, down from $95 billion at the end of 2008. UBP said “this figure reflects both the contraction of the alternative asset management industry, which started in the last quarter of 2008 and lasted throughout the first half of this year, and the flow of assets into traditional investments.”
Deleveraging pushed its Tier 1 capital ratio up to 24.9% from 18.5% at the yearend. Chief Executive Guy de Picciotto has said that UBP is reducing its proportion of assets invested in hedge funds, but will increase exposure to long-only products. He has also said the group has funds available to explore take-over opportunities in the Swiss private bank sector.
De Picciotto said:
“UBP’s adaptability has enabled it to rise to the current challenges and to maintain its earnings capacity intact amid the current market turmoil and lack of stability. Over the first half of the year, we focused on preserving our clients’ capital, recruiting top-flight talent, seizing new investment opportunities and curbing our costs. We also revised our business model. The decisions taken pave the way for the Bank’s future and confirm our long-term commitment to our clients.”
Cost-cutting measures in all divisions enabled the Bank to reduce its operating expenses by over 12% from the same period a year ago. The Group’s consolidated cost/income ratio was 65% after depreciation. The balance sheet totalled $19bn and the annualised return on equity was 11.7% for the period compared with 29.1% for the first half of 2008.
To fund the incentive scheme instigated by UBP in March and directed at eligible clients affected by the Madoff fraud, a $102m provision was made, which was covered by an equivalent write-back of reserves. UBP has said client exposure to Madoff could surpass 1.0bn CHF.
The bank said:
“Alternative asset management is still a prised tool in asset allocation and the dislocations in the financial system have created new opportunities. Against this backdrop, the bank has therefore demanded more transparency of its asset managers, first-rate corporate governance and a strict separation of asset management, administration and custodianship.”
“Moreover, the Bank is adding to its traditional products, specifically in its bond and equity ranges. Dynamic asset allocation aiming at preserving capital whilst being ready to spot the best entry points in the new investment regime that is taking shape is at the core of our strategy."
