UBS profit shines in second quarter

UBS beat market expectations for the second quarter Ex-press

Swiss bank UBS has reported a second-quarter net profit of SFr2.005 billion ($1.91 billion), slightly lower than the first-quarter result of SFr2.2 billion.

The second-quarter profit exceeded analysts’ forecasts and client money withdrawals fell to their lowest level since early 2008.

The news was met with enthusiasm at the Zurich stock exchange, with the UBS share price rising by seven per cent cent in early morning trading to SFr16.80. By the end of the day shares had leapt 11.2 per cent to close at SFr17.46.

The bank said its Investment Bank had made SFr1.3 billion in pre-tax profit, up ten per cent on the first quarter, driven by equities revenues of SFr1.365 billion, foreign exchange revenues and fixed income, currencies and commodities revenues.

Also contributing to the performance were “resilient” pre-tax profits in the bank’s Wealth Management and Swiss Bank divisions.

Analysts polled by Reuters had expected a second-quarter net profit at Switzerland’s largest bank by market value of SFr1.34 billion.

“This was a good result in volatile market conditions,” commented UBS chief executive Oswald Grübel.

“Confident”

“I remain confident in our future and I firmly believe that we have the right strategy in place.”

Net new money outflows between the beginning of April and end of June reduced to SFr5.2 billion from SFr8 billion in the previous quarter.

There were continued new inflows in the Asia Pacific region from ultra high net worth clients and in certain European countries.

Overall, net new money in Europe remained “slightly negative” but net outflows decreased again compared with the previous quarter.

Analyst Peter Thorne at equities brokerage Helvea commented that UBS was currently a cheap financial stock. “All that is needed is better financial markets and an end to regulatory uncertainty for the shares to perform better…”

In its outlook, UBS said concerns about the sustainability of the global economic recovery “may leave markets volatile and with little direction”.

The bank believed this could lead to more subdued client activity across its businesses.

“We are delivering on our strategy and expect to make further progress over the coming quarters. We are confident about our future,” the statement added.

Comprehensive resolution

In a related development, UBS said that after Swiss parliamentary approval of the United States-Swiss government agreement, it expected to achieve a comprehensive resolution of all outstanding matters related to US cross-border business by October 2010.

UBS, which was for many years the star of the Swiss banking industry, lost billions of dollars during the global economic crisis and the confidence of many investors during a lengthy tax dispute with the US.

The two chambers of the Swiss parliament has approved closer cooperation with the Internal Revenue Service, the US tax collection agency.

UBS has agreed to turn over 4,450 names of wealth Americans suspected of dodging taxes through secret accounts.

It was fined $780 million in February last year after admitting helping US clients dodge taxes.

On Thursday last week Swiss rival bank Credit Suisse reported a second-quarter net profit of SFr1.6 billion for the second quarter.

It reported a net new asset gain of SFr14.5 billion from wealthy individuals and institutional clients in the second quarter (SFr40.5 billion for the first half of the year).

swissinfo.ch and agencies

UBS Chronology

UBS’s problems started to become apparent in July 2007, when chief executive Peter Wuffli stepped down following the collapse of the bank’s hedge fund Dillon Read Capital Management.

In October 2007, UBS said it would cut 1,500 jobs in its investment banking arm. Chairman Marcel Ospel stepped down in April 2008.

In October last year, the Swiss National Bank (SNB) was injected SFr6 billion ($5.29 billion) into UBS. A facility was also set up to allow the bank to bin up to $60 billion of toxic assets.

UBS has also been haunted by a US investigation that accused the bank of helping wealthy Americans illegally evade $200 billion in taxes. It was forced to pay $780 million in fines and hand over the confidential details of 4,450 clients.

The bank posted a loss of more than SFr20 billion in 2008. Its loss in 2009 was just over SFr2 billion, buoyed by a fourth quarter profit.

UBS, announcing its Q2 result, said it expected an end to its US regulatory problems now that the Swiss parliament has approved closer cooperation with the Internal Revenue Service, the U.S. tax collection agency.

The bank has agreed to turn over 4,450 names of wealthy Americans suspected of dodging taxes.