We have now met our commitment to bring our fixed cost base down to the announced annual run rate target of less than 20 billion francs by 2010. We still expect that additional cost savings will be achieved as a result of headcount reductions that are still to be reflected in our cost base.
The chart at the top of this slide shows the change in the number of staff, on a full–time equivalent basis, employed with the bank over the third quarter. Almost 1,000 of the overall reduction in headcount was attributable to divestments.
The chart at the bottom of the slide shows our broad expectation of the development in headcount in 2010. Actual numbers will inevitably vary for a range of factors, including voluntary departures and our hiring programs.
We do still expect that the adjusted overall Group headcount target of 65,000 full time equivalents will be met in 2010. This takes into account the sale of our offshore off–shoring business center in Hyderabad, which we expect to complete in Q4.
Net new money flows in the quarter were again negative in our three Wealth and Asset Management divisions. In Wealth Management and Swiss Bank, net new money outflows increased slightly on those of the prior quarter.
Flows from international clients improved, whereas those from Swiss clients deteriorated by marginally more. We saw net outflows in all geographic regions but they were only modest in Asia.
In Wealth Management Americas, we saw net new money outflows of just under 10 billion francs. The financial advisor population decreased by 653 or 8% during the quarter, though of this, 274 FAs left as a result of divestments.
The remaining net reduction of 379 reflects our limited recruiting, some further redundancies of lower producing advisors and voluntary departures.
In Global Asset Management, net new money outflows of 10 billion francs compared with 17.1 billion francs in Q2. Excluding money market flows, net new money outflows slowed to 2.3 billion francs from 7.8 billion francs in the second quarter.
The third quarter saw the first positive net inflows from clients other than those of our Wealth Management businesses since the fourth quarter of 2006. Net outflows relating the Wealth Management channels were 13.3 billon francs.
To put client flows into perspective, the chart shows the movement in client invested asset balances from quarter end to quarter end, and these balances are an important driver of our recurring fee income.
Overall, invested asset balances were stabled showing a modest increase. Strong investment performance was offset by outflows, divestments and the appreciation of the Swiss franc, particularly against the U.S. dollar.
I’m now turning to divisional performance. Revenues in Wealth Management and Swiss Bank fell 3% quarter–on–quarter to just over 2.8 billion francs. Portfolio management fees were up strongly, but brokerage fees were seasonally low.
Interest income, especially on our deposit books, fell sharply as yield curves flattened in all major currencies. The margin on client assets fell four basis points, from 87 to 83. On the face of it, this is concerning, but there are a couple of contributory factors to this that merit explanation.
First, we significantly increased the allocation of the quarterly cost of our liquidity buffer to this division. In future quarters, this cost allocation will revert to previous levels and should anyway reduce overall in light of the flattening of yield curves. Second, WM&SB took a charge on its holding of units in a property fund.
Overall, I would expect revenues to start to improve in the fourth quarter notwithstanding the continued drag from depressed liability margins. Underlying expenses were broadly flat quarter–on–quarter, but reported numbers were impacted by the shift in Group compensation policy that rendered a larger proportion of the division’s bonus pool payable in cash and therefore expensed in this year.
The third quarter numbers incorporate a year-to-date catch-up effect. Also, consequent upon the sale of Pactual, we took a charge of 47 million francs for the write-down of intangibles related to our private banking business in the Bahamas.
We remain dedicated to turning around net new money flows and improving the margin we earn on client–invested assets. Jürg Zeltner and Franco Morra will present our plans for doing this in some detail at the Investor Day.
In the appendix to the slide pack, Philip has included a slide showing you the disclosure enhancements we propose for this division. And you’ll be pleased to hear we will essentially revert to showing you separate P&Ls for Wealth Management and for the Retail and Corporate Banking business in Switzerland.
Wealth Management Americas returned to profitability with a reported pre-tax profit of 110 million francs. The recovery was largely driven by cost control. Operating income increased 1% quarter-on-quarter in Swiss francs terms, despite a 5% fall in the value of the dollar over the period.
|
