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Private banking gains boost UBS profit

Switzerland's largest bank says second-half revenues will not match those of the first

(Keystone Archive)

Switzerland’s largest bank, UBS, has put in its second best quarterly performance since 2000, with strong revenues from its wealth management business offsetting weaker trading income.

The bank reported that net profit was up by 28 per cent over 2003 to SFr1.974 billion ($1.58 billion), matching analyst expectations.

UBS said that half-year net profit had jumped by 60 per cent to reach SFr4.397 billion.

Last week, rival Credit Suisse announced second-quarter income of SFr1.457 billion, but cautioned about future prospects.

It also reported that net income at the equities, fixed income and investment-banking unit Credit Suisse First Boston had fallen by 79 per cent from the first quarter.

Both factors contributed to a fall in the CS share price.

UBS warning

UBS similarly warned in a statement on Tuesday that revenues in the second half were unlikely to be as good as in the first six months, when solid financial markets boosted earnings.

And in its outlook, the world’s seventh-largest bank stopped short of repeating that it was “optimistic” for the rest of the year, as it had said three months ago.

In the statement, UBS said that the second quarter had seen net new money of SFr16.9 billion, with SFr10.4 billion from wealth management clients worldwide.

“Halfway through 2004, we can see that the markets’ astonishing start to the year has settled into a more normal rhythm,” commented UBS chief executive Peter Wuffli.

“In that context, this was a good quarter for UBS, demonstrating the importance of having the world’s leading wealth management operation as a central part of our focused strategy,” he added.

Biggest asset manager

UBS managed a total of SFr2.23 trillion in client funds at the end of June, underscoring its position as the world’s biggest asset manager.

“This quarter, strong asset-based fees from our wealth management and asset management franchises, alongside the progress of our corporate client franchise, have helped us to balance lower securities revenues,” commented chief financial officer Clive Standish.

In comments on the outlook, UBS said that while investor sentiment had recovered from the very low levels of last year, it still remained “subdued”.

Combined with directionless markets and the expectations of rising interest rates, this might continue to dampen levels of market activity, it said.

“Since many of our businesses, especially our Investment Bank, have activity as an important driver, we should expect a return to a more normal seasonal pattern this year with second-half revenues not matching those in the first half,” Wuffli commented.

Earnings held back

Second-half earnings at UBS were held back by a $100 million fine by the US Federal Reserve for transferring US currency to Cuba, Iran, Libya and the former Yugoslavia – all subject to US trade sanctions – and trying to hide the transactions.

As a result, UBS has ended its US banknote trading business outside Switzerland and fired or disciplined several employees.

“The behaviour highlighted by the investigation cannot and will not be tolerated in UBS,” Wuffli said in May.

In another development, UBS last week said it would defend itself “vigorously” against claims from the insolvent Italian food group, Parmalat, which is seeking to recover money related to bond sales.

Parmalat is seeking €290 million plus interest in the action against UBS, filed in a Parma court, and reserves the right to bring another suit to recover damages.

“We believe that the transaction in question was entirely valid and therefore any attempt to declare the transaction invalid will be met by a vigorous defence by UBS,” the bank said in a statement.

swissinfo with agencies

Key facts

Second quarter figures:
Net profit : SFr1.974 billion (+28 per cent)
Operating income : SFr9.484 billion
Operating expenses: SFr6.889 billion
Net new money: SFr16.9 billion, with SFr10.4 billion coming into the wealth management business.
As the world’s biggest asset manager, UBS managed SFr2.23 trillion in client funds at the end of June.

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