UBS reports 1st annual profit since 2006

[February 08, 2011]  GENEVA (AP) -- Swiss bank UBS AG on Tuesday posted its first annual profit since the global financial crisis erupted, despite softer-than-expected fourth quarter earnings, and said it had managed to stanch the rich customers' withdrawals that had plagued it since a high profile tax evasion scandal.

The largest Swiss bank reported that it made a net profit last year of 7.2 billion Swiss francs ($7.5 billion), compared with a 2009 loss of 2.7 billion francs.

The last year that UBS had posted an annual profit was in 2006. In the years since then the Zurich-based bank had incurred major losses from the U.S. real estate market and required a Swiss government bailout.

But its fourth-quarter profit was 1.29 billion francs ($1.35 billion), only a modest improvement from a year earlier, when the bank reported a profit of 1.205 billion francs, and below market expectations for 1.45 billion francs.

"While we made substantial progress in 2010, we are fully aware that we have to continue to improve our results," said UBS Chief Executive Oswald Gruebel in a statement.

Fourth quarter results benefited from a one-off tax credit of 149 million Swiss francs -- significantly smaller than the one-off tax credit of 825 million Swiss francs that helped UBS beat expectations in the third quarter.

UBS said its securities unit and its private bank benefited from income gains. Its wealth management division, one of the biggest in the world, reversed earlier net outflows, suggesting it had regained the trust of rich clients who fled during a bitter tax evasion dispute with U.S. authorities.

Cross-town rival Credit Suisse, which is also based in Zurich and reports its fourth-quarter results on Thursday, had been gaining market share at the expense of UBS.

"Net inflows of new money were very small during the fourth quarter compared with 1 billion Swiss francs in the prior quarter. We saw inflows in the Asia Pacific region, in emerging markets and globally from ultra high net worth clients," the bank said.

UBS had struggled to stem the flow of client withdrawals and had launched a large marketing campaign to win back the confidence of Swiss customers. In 2009, net clients withdrawals totaled 2.74 billion francs.

UBS said will not pay a dividend to its shareholders this year and will instead store up the profit to meet stricter Swiss banking rules and new international banking standards requiring higher stores of capital. It also said it was confident that activity among its wealthy clients would pick up this quarter.

Shares in the bank were trading mid-morning at 17.71 francs, up from its 17.50 closing share price Monday.

UBS said it had cut its bonus pool by 10 percent, down to $4.3 billion Swiss francs -- which is $500 million Swiss francs less than in 2009.

Those figures reflect the bank's attempt to appease Swiss government, which kept the bank going two years ago, but retain talented staff. The head of the bank's compensation committee, UBS board member Sally Bott, stepped down Monday.

UBS said its fourth quarter profits before taxes rose to 1.161 billion Swiss francs, up from 818 million Swiss francs in the third quarter, which it said reflected more client activity across all businesses and included some credit losses and higher general and administrative expenses.

Analyst Tobias Brutsch at private bank Vontobel had said investors would be looking for details on the restructuring of UBS's investment bank, which is still lagging behind the company's overall recovery. He had said he expected net profits of 1.44 billion francs in the fourth quarter.

In November, UBS firmed up a deal with American authorities to end a damaging three-year dispute and avoid further prosecution by the U.S. Justice Department. Under that deal, which cost UBS $780 million in fines, the Swiss government is to turn over the names of 4,500 suspected American tax cheats.

[Associated Press; By JOHN HEILPRIN]

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