UBS earnings back in black

4 November 2008

ZURICH – UBS AG posted a net profit of CHF 296 million for the third quarter Tuesday, its first after four consecutive quarterly losses, and predicted customers would continue withdrawing funds in the last three months of the year.

The bank said it returned to profitability with the help of a CHF 913 million tax credit and writeups on its credit positions that booked a gain of CHF 2.21 billion.

Switzerland’s largest bank said its investment banking business recorded writedowns and losses of USD $4.4 billion during the quarter. Net new money, a key indicator of future business, remained negative during the three months to September, with customers withdrawing CHF 84 billion during the period.

The results came as little surprise after UBS told investors what to expect in October when it agreed on a USD 60 billion bailout deal with the government that will allow it to bolster its reserve and dispose of many of the toxic assets it is still sitting on.

Analysts said last week they would be looking at capital outflow figures for October as an indication of how the bank’s wealth and asset management businesses will develop during the fourth quarter.

UBS did not provide precise figures for October, but indicated that investors should prepare for further large-scale customer withdrawals.

The bank also said its fourth quarter results will reflect the gains and losses booked due to the sale of assets to the so-called "bad bank" set up with the government, whose sole purpose is to dispose of UBS’s risky investments. Profits from the sale will be split between UBS and the Swiss National Bank.

UBS said it intends to further reduce costs during the fourth quarter, but did not spell out how many jobs might be cut as a result.

The bank reduced its work force by almost 1,900 in the third quarter to 79,565.

[AP / Expatica]