(Bloomberg) -- UBS Group AG’s wealthy clients added $15.7 billion in new money last quarter, giving a boost to star hire Iqbal Khan as he seeks to reinvigorate the key wealth management unit.

The inflows lifted assets overseen for the affluent to a record $2.5 trillion, UBS said in a statement Tuesday. The asset management unit won $24.1 billion in long-term net inflows. While profit beat analysts’ estimates, UBS said it will book a roughly $100 million charge in the fourth quarter to restructure its investment bank, and warned that lower interest rates will hurt income from lending compared with last year.

“We continue to take actions to grow profitability,” Chief Executive Officer Sergio Ermotti said in the statement.

Ermotti is seeking to turn the corner after a year marred by huge legal fines, questions about succession planning and a deepening slump in the share price. In August, he shook up the management board, hiring former Credit Suisse Group AG banker Khan to co-run the wealth management unit and positioning him as a potential successor. But Khan’s start at UBS was overshadowed by a spying scandal that exposed a deep rift with his former boss.

UBS was one the first banks to pivot away from investment banking and toward wealth management after the financial crisis, becoming a model for rivals including Credit Suisse. But increasing competition for rich clients, negative interest rates and a slowing economy are putting pressure on that business. UBS said in August that it would expand a policy of charging affluent clients for excess cash holdings.

Trailing Shares

Shares of the lender have lost 6.5% this year, compared with a gain of 15% at Credit Suisse, where a three-year restructuring modeled on UBS’s pivot to private banking is beginning to bear fruit. To lift the stock, UBS has earmarked $2 billion for share buybacks through 2020. It is nearing its $1 billion target in buybacks this year.

Global wealth management is by far the biggest of UBS’s units, contributing more than twice as much revenue and pretax profit last year as the investment bank. Pretax profit at the unit declined about 2%, UBS said, as fee income and income from lending fell.

Khan, in a memo to employees after he started this month, pointed to “unrealized potential” within the wealth management business. Key will be his take on developing UBS’s offering to wealthy clients in Asia, a region that wasn’t under his control at Credit Suisse and which produces millionaires at a faster pace than other regions.

Khan is running the business alongside co-head Tom Naratil, who focuses on the Americas. He joined under a cloud after it emerged that Credit Suisse had private investigators follow him to make sure he didn’t try to encourage others to defect. The scandal exploded onto the front pages of local tabloids and exposed a personal feud between Khan and his former boss, Tidjane Thiam. One of Thiam’s key lieutenants left the bank after he was found responsible for ordering the surveillance.

Trading Unit

Ermotti is also making changes to the investment bank, reshuffling senior management and combining trading operations in changes that may ultimately eliminate hundreds of positions, people with knowledge of the plan have said. The bank is cutting about 40 jobs in the Asia-Pacific region as part of the shake-up, a person familiar with the matter has said.

The restructuring comes as UBS seeks to boost collaboration between dealmakers and its wealth-management unit, while sharpening a focus on industries most of interest to its richest clients. Pretax profit at the unit fell 59% from a year earlier.

The bank has had a rocky year so far. It was dealt a $5 billion penalty in a French tax case in February that it intends to appeal. After warning of a difficult market in the first quarter, it announced $300 million in additional cost cuts. Ermotti previously signaled that the bank may struggle to reach its 15% adjusted return on tangible equity capital, instead saying that the bank could achieve a level on par with last year’s 13% return.

To contact the reporters on this story: Marion Halftermeyer in Zurich at mhalftermeye@bloomberg.net;Patrick Winters in Zurich at pwinters3@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Christian Baumgaertel, Nicholas Comfort

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