UBS bank says client cash flows back, reports profit

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Swiss bank UBS said on Tuesday it had won back client's cash for the first time since the financial crisis as it switched into a third-quarter net profit of 1.66 billion Swiss francs.

However, the result disappointed markets as analysts said that exceptional items bolstered the result, and UBS's share price dropped by 5.39 percent by the middle of the day (1121 GMT).

The result also depressed banking stock in France, as UBS adopted a cautious tone in its statements.

"Between the results at UBS and the announcement on an increase in capital at (Italian) Banco Popolare, there are at the moment quite a few question marks over the sector," said Yves Marcais, a trader at Global Equities.

The net profit attributable to shareholders, equivalent to 1.71 billion dollars or 1.22 billion euros, compared with a 564-million-franc loss during the same period last year.

Net new money in the form of deposits reached 1.2 billion Swiss francs in the third quarter of 2010.

This was a turnaround from an outflow of withdrawals by fearful clients. Business was strong business in the Asia-Pacific region.

"We like to see few quarters of more consistent positive inflows to be able to say that we turned around the situation," Chief Financial Officer John Cryan said in a conference call.

UBS said in a statement that its investment banking business suffered from reduced flows in equities while wealth management revenues also decreased.

"The third quarter was unusual in that there were very low levels of client activity as well as a strengthening of the Swiss franc against most major currencies," said chief executive Oswald Gruebel.

"However, we are optimistic that an uptick in the fourth quarter will benefit all of our business divisions. We remain confident about our future and believe that we are on track to achieve our medium-term goals," he added".

The bank, which was one of the hardest hit in the financial crisis, is counting on its profits to shore up its capital foundations and meet tougher international banking regulations over the coming decade.

Analysts polled by Swiss business news agency AWP had forecast an average third quarter net profit of around 1.1 billion francs.

UBS beat analysts' expectations during the previous quarter with net profit of 2.0 billion Swiss francs.

Third quarter net new money inflows in wealth management alone reached 1.0 billion francs, compared with outflows of 5.2 billion francs in the second quarter, especially thanks to business in the Asia-Pacific region.

Although the market pattern of low volumes and "subdued" activity in securities trading dampened investment banking, UBS said revenues from emerging markets increased to 117 million francs from 73 million, especially thanks to gains in the Asia Pacific region and east Europe.

It offset the revenue decline by slashing 731 million francs in costs, as reduced staffing and better currency management started to bite.

Analysts at Vontobel bank private bank pointed to a lower than expected pre-tax profit of 818 million Swiss francs, "a weak result that was not expected.

Analysts at Zuercher Kantonalbank also voiced disappointment with the profit but welcomed the return to net new money inflows "a little earlier than expected."

The bank said it expected an improvement "to some degree" of investment returns and year-end corporate transactions to bolster business in the fourth quarter.

Rival Credit Suisse, which emerged from the financial and economic downturn in a healthier position than UBS, saw its third quarter net profits melt by 74 percent with the subdued investment markets.

© 2010 AFP

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