UBS posts big quarterly loss

4th August 2009, Comments 0 comments

Switzerland’s biggest bank posts a loss of CHF 1.4 billion for the second quarter.

Zurich -- Swiss banking giant UBS reported on Tuesday an almost quadrupled net loss of CHF 1.4 billion (EUR 916 million, USD 1.32 billion) during the second quarter, said that customers continued to withdraw assets, and issued a "cautious" outlook.

Market conditions improved during the period but the overall economy in most areas where the bank was operating remained recessionary, UBS said in a statement.

"Sustainable recovery is not yet visible," it added.

Unlike several international banks which posted sharp gains in profits for the period, UBS posted a substantial deepening of the CHF 358 million loss during the same period in 2008.

UBS said its earnings were hit by a credit charge of CHF 1.2 billion, restructuring charges of CHF 582 million and an impact of CHF 492 million in relation to the sale of UBS Pactual.

It also failed to stop an outflow of assets during the second quarter.

Its wealth management and Swiss bank division posted net new money outflows of CHF 16.5 billion.

The bank's wealth management Americas division posted outflows of CHF 5.8 billion and its global asset management division recorded an outflow of CHF 17.1 billion.

John Cryan, the bank's chief financial officer, told journalists that outflows from Swiss clients were "much more stable" than the previous quarters, but that the "large majority" of the outflow was related to international clients.

The bank was struggling to regain clients' confidence after losing almost CHF 20 billion in 2008 on the US subprime crisis and its financial and economic fallout.

It is also troubled by a lawsuit filed by US authorities seeking to find Americans holding offshore bank accounts to evade taxes, a case which the bank said was hurting its bid to regain the trust of its clients.

Both parties in late July reached an agreement in principle to resolve the issue.

In a letter to shareholders outlining its second-quarter results, the bank said it looked forward to a "definitive resolution" of the case.

Pointing to the agreement in principle, it added, "This is a positive development in a matter that has adversely affected our efforts to regain the trust of our clients and to restore momentum to our businesses."

Cryan would not give further details of the case.

Bank Wegelin analysts noted that the outflows at the bank were still "problematic" but that the deal with the United States should be helpful.

"More appears to be needed for a sustainable recovery, and the bank must prove that it can substantially improve its situation in the coming quarters, stop the outflow of clients' funds and make a profit," it said.

The bank's stock opened up 0.75 percent at CHF 16.12, outperforming the trend of a weak Swiss Market Index, which was down 0.30 percent.

UBS' latest results contrast starkly with those of fellow Swiss banking giant Credit Suisse, which posted a 29 percent leap in second quarter profits of CHF 1.571 billion.

AFP / Expatica

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