UBS posts forecast-beating second quarter profit

27th July 2010, Comments 0 comments

Swiss banking giant UBS reported on Tuesday a net profit of 2.0 billion francs (1.5 billion euros, 1.9 billion dollars) for the second quarter, almost doubling analysts' expectations.

Switzerland's biggest bank issued a muted outlook, however, saying that concerns over the sustainability of the global economic recovery could result in continued market volatility, thereby leading to less client activity.

Analysts polled by the economics news agency AWP had forecast a profit of 1.1 billion francs for the April to June period this year.

The bank's earnings marked a turnaround from a loss of 1.4 billion francs reported during the same period last year, and marked its third profitable quarter running after colossal losses incurred during the financial and economic crises.

Its earnings were lifted this quarter by its wealth management and Swiss bank division, as well as investment bank unit, both of which posted over a billion in pre-tax profit.

"This was a good result in volatile market conditions, and demonstrates the progress we are making as we move towards our mid-term targets," said Oswald Gruebel, chief executive of the Zurich-based bank.

Bank Vontobel said it would raise its forecasts on UBS given the latest results.

Zuercher Kantonalbank's analysts noted: "The trend is in the right direction, even if the result was improved by diverse exceptional elements."

Investors welcomed the result, sending the stock soaring 8.73 percent at 10.07 am to 17.07 francs, significantly outperforming the Swiss Market Index which was up just 1.04 percent.

The bank also reported that a problem with an outflow of funds was easing.

During the quarter, net new money outflow was reduced to 4.7 billion francs, compared to 18 billion francs in the first quarter.

Due to uncertainties arising over a tax evasion lawsuit filed by the United States as well as a loss in client confidence following losses during the financial crisis, the bank had recorded a sharp increase in net new money outflows as clients took their assets elsewhere.

UBS said on Tuesday that it expects to "achieve a comprehensive resolution of all outstanding matters with the US government related to the US cross-border business by October 2010."

This was made possible after the Swiss parliament in June approved a landmark accord between the US and UBS, allowing the bank to pass on data on some US clients to the country's tax authorities.

© 2010 AFP

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