UBS shines, but warns of clouds on horizon

The world's leading wealth manager beat analysts' expectations swissinfo.ch

Swiss bank UBS reported a second-quarter net profit of SFr5.62 billion ($4.67 billion), up 79 per cent on the same period last year.

Despite the strong result, which beat analysts’ expectations, UBS warned that profits in the second half of the year were likely to be lower than a year ago because of market turmoil.

Over the first six months of the year UBS accumulated a net profit of SFr8.897 billion – a record for Switzerland’s largest bank.

The result came following the closure of its hedge fund Dillon Read Capital Management in May and paybacks to outside investors. However, it received a SFr1.92-billion windfall from the sale in June of UBS’s stake in Swiss private bank, Julius Bär, according to a statement on Tuesday.

The world’s largest wealth manager had recorded a net profit of SFr3.28 billion in the first quarter of 2007.

UBS warned that the upheaval in financial markets was likely to take a toll on results in the second half of the year.

“If the current turbulent conditions prevail throughout the quarter, UBS will probably see a very weak trading result in the investment bank, offset by predictable earnings from wealth an asset management,” it said.

Expectations

Analysts had forecast a net profit of SFr4.75 billion, up from SFr3.15 billion in the second quarter of 2006.

“Investment banking business saw a very strong rise in merger and acquisitions and corporate finance fees and higher equity and debt underwriting fees.

“One measure of the strength of UBS’s market position is global market share,” the bank added.

New net money in wealth management was SFr35.2 billion, also ahead of experts’ forecasts.

Dirk Becker, an analyst with Kepler Equities, told Reuters that earnings were poor but in line with expectations after the Dillon Read problems.

Predictions of weak third-quarter trading revenue means the bank is still sitting on bad Dillon Read sub-prime lending bets, Becker added.

But he said investment banking advice and equities were very positive.

US market

Chief Executive Officer Marcel Rohner said trading results in July in the United States mortgage-backed market were satisfactory.

“We have experienced significant dislocation in the US mortgage market, but we have had a satisfactory trading result,” he said.

Tuesday’s results are the first to be unveiled since Peter Wuffli’s abrupt departure and replacement as chief executive officer in July by Rohner, who formerly ran the bank’s huge wealth management business.

Switzerland’s second-largest bank, Credit Suisse, reported a second-quarter profit of SFr3.2 billion – up 48 per cent compared with the same period in 2006.

swissinfo with agencies

Key facts

Results for first half of 2007:
Net profit: SFr8.9 billion
Operating expenses: SFr18.79 billion
Operating income: SFr29.0 billion
Basic earnings per share: SFr4.31
Net new money:SFr86.8 billion
Number of employees at end of June: 71,882


Results for second quarter of 2007:
Net profit: SFr5.62 billion (+79% on same period a year earlier)
Net profit attributable to shareholders: SFr3.15 billion
Operating income: SFr12.06 billion
Total assets: SFr2.13 trillion