UBS back in profit after 4 quarterly losses

[November 04, 2008]  ZURICH, Switzerland (AP) -- UBS AG posted a net profit of 296 million Swiss francs ($252 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 benefitted from a 913 million francs ($776 million) tax credit and a revaluation of its credit positions that led to a 2.21 billion francs ($1.88 billion) gain on its books.

Switzerland's largest bank said its investment business recorded writedowns and losses of $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 84 billion francs ($74 billion) during the period.

The results came as little surprise after UBS told investors what to expect last month when it agreed on a $60 billion bailout deal with the Swiss government.

About 6 billion Swiss francs ($5.1 billion) will be used to bolster the bank's reserves, resulting in the government holding a 9.3 percent stake in UBS.

But most of the bailout money will be used to transfer subprime-related assets and other high-risk securities from UBS to a so-called "bad bank," whose sole purpose is to sell the risky investments. Any profits will be split between UBS and the Swiss National Bank.

UBS said the move would leave it with "nearly zero" exposure to a market that has cost it over 45 billion Swiss francs ($40 billion) in losses and writedowns over the past year. UBS said its fourth quarter results will reflect the disposal of those assets.

With third quarter figures already known, analysts said last week they would focus on whether customers continued to withdraw more money than they deposited in October. The balance is seen 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 withdrawals.

John Cryan, the bank's chief financial officer, said customers wanted to spread their investments among several banks to minimize risk, a trend he expects to continue for some time.

The Zurich-based bank's business with U.S. clients has also suffered as a result of its decision to stop providing offshore services there following allegations that it helped rich Americans evade taxes.

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.

UBS revealed earlier this week that chief executive Marcel Rohner and its twelve board members will not receive bonuses this year, following pressure from politicians and the media to crack down on what were considered management pay excesses in view of bank's massive losses and subsequent government bailout.

Shares in UBS were up 0.3 percent at 19 Swiss francs ($16.23) in Zurich.

[Associated Press; By ONNA CORAY]

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