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UBS back in profit despite cash exodus

Tuesday, February 09 07:43:23

Swiss bank UBS has posted its first quarterly net profit since Oswald Gruebel took the helm a year ago, but client withdrawals rose well above forecasts, signalling he may need more time to steady the ship.

UBS, left damaged by the credit crisis and a bitter US tax row, is struggling to secure the sustainable recovery it needs to win back client and investor confidence, particularly as a US settlement is now in question and Swiss bank secrecy remains under attack.

Pressure from an aggressive Italian tax amnesty in the final quarter of 2009 added to persistent brand damage that has hampered UBS' performance in the last two years and Gruebel said the bleeding of client money would continue.

"We are confident that the measures we are taking to address the causes of client asset outflows will be effective, but in the immediate future we still expect to report outflows," Gruebel and Chairman Kaspar Villiger, a former Swiss minister brought in to help clinch the US tax deal, said in a letter to investors.

UBS has posted a quarterly net profit of 1.205 billion Swiss francs, partly helped by one-off tax credits of 480 million francs and a cut in bonuses, its second positive quarter in two years.

Profit was ahead of expectations of 326 million francs in a Reuters poll.

"The money outflows will dominate the discussion today so the share will likely come under pressure," said Kepler Capital Markets analyst Dirk Becker.

"The margin in private banking has dropped further. They beat expectations but it looks like it was only because of non-operational items."

"The one big (thing) they achieved was to get back into profit in the fourth quarter, but it was expected. Obviously it would have been worse if they had not managed to do this."

UBS' investment bank, which had shown improvements in the previous two quarters, turned positive at pre-tax level with a gain of nearly 300 million francs after the bank cut its balance sheet by a further 11 percent and slashed personnel costs.

"We expect that the Investment Bank's performance for 2010 as a whole will improve, in part because its residual risk positions should have a much reduced impact on results," Gruebel and Villiger said.

(c) Reuters