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ZURICH: Troubled Swiss bank UBS said Tuesday it had jumped back into quarterly profit for the first time in more than a year even though it was still grappling with a damaging loss of client confidence.
The bank, severely hit by the financial crisis as well as international pressure on tax evasion and Swiss banking secrecy, posted a 1.20-billion-franc profit (1.12 billion dollars, 821 million euros) in the fourth quarter of 2009.
It was the first time that Switzerland's banking flagship had reported a profit since the third quarter of 2008, helping to cut its 2009 net loss to 2.73 billion francs from 21.29 billion francs in 2008.
The earnings figures outstripped analyst expectations but investors were unimpressed as unsettled clients continued to withdraw their funds.
The drop in UBS shares accelerated during the day and they were down 5.7 percent in afternoon trading in Zurich.
Chief executive Oswald Gruebel said the reputational damage caused by the fallout from the global credit crisis and legal pressures over tax issues, especially in the United States, "should not be underestimated."
On Tuesday, UBS reported that net money outflows from its international wealth management unit more than doubled from the previous quarter.
Net new money outflows totalled 56.2 billion Swiss francs in the fourth quarter, despite an increase in assets from Asia. The outflows from its global wealth management unit rose to 27.3 billion francs from 12.9 billion francs.
The bank said outflows would continue "in the immediate future."
Analysts at Helvea described the fourth quarter outflows as "horrendous" despite praise for the grip on costs and a better-than-expected investment banking performance.
"These factors are overshadowed by the awful outflows from the wealth management unit and the prospect of more to come because client advisors are leaving and the worsening newsflow over Swiss banking secrecy and the US tax case," they commented in a note.
Even Swiss customers continued to desert UBS as total net new money outflows in domestic banking reached 5.9 billion francs in the last quarter, compared with 3.9 billion francs previously, despite more corporate and institutional business.
UBS said, however, that it managed to hold on to 14.3 billion francs of the 22.8 billion francs in invested client funds affected by an Italian tax amnesty, and also underlined a sharp boost for profits in all wealth management units.
In a letter to shareholders, UBS management called the ongoing outflows "disappointing," despite the improved profitability.
"We entered 2009 at the height of the crisis. By the end of 2009, UBS has returned to profitability, delivering on its priorities," Gruebel said.
"We expect that our return to profitability will increase clients' confidence in UBS and restore our reputation," he added.
UBS said that addressing the causes of net new money outflows "remains a main priority."
Swiss Justice Minister Eveline Widmer-Schlumpf warned in a newspaper last month that UBS could be under threat if sensitive talks with the United States over a deal settling high-profile tax fraud investigations fell through.
The bank, which was one of the hardest hit in the global financial crisis and has struggled to recover compared to some of its US and British rivals, also bolstered its capital reserves through 2009.
UBS said it expected to see an improvement in its crisis-hit investment bank performance in 2010.
"The investment bank's results always depend heavily on market vitality and client activity levels have been high in January," the statement said. - AFP/de
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