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UBS sinks deeper into the red

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Embattled Swiss bank UBS lost SFr1.4 billion ($1.32 billion) in the second quarter of 2009, pushing total losses for the first half of 2009 to about SFr3.4 billion.

This content was published on August 4, 2009 - 08:19

Analysts had predicted losses of SFr1.2-SFr1.8 billion and pointed to the bank's SFr582 million restructuring bill and a SFr1.2 billion credit charge that pulled profits down. UBS lost SFr12 billion in the first half of 2008.

The bank said its outlook was cautious but that market conditions had improved steadily during the second quarter. Asset prices and investor confidence had begun to grow.

"In spite of these positive economic signs, the overall economic environment in most of the regions in which we operate remains recessionary," the bank said in a statement. "Sustainable recovery is not yet visible."

UBS said it was on track to reduce its base costs by SFr3.5-4 billion over the next year. So far the bank has eliminated 4,400 jobs with another 4,300 positions to be lost by 2010.

Positive development

Tuesday's figures were the seventh time in two years that Switzerland's now-second largest bank had posted a quarterly loss.

Its wealth and management divisions suffered large client withdrawals totalling SFr39.4 billion. Executives had warned investors in June that it would post a loss in the second quarter.

Cross-town rival Credit Suisse meanwhile was able to take advantage of a market rebound and beat analysts' expectations with second-quarter profit of SFr1.6 billion.

UBS shares were not in on the rally as the bank wrestled with a pending trial in the United States for refusing to hand over the names of 52,000 wealthy American clients to the Internal Revenue Service (IRS).

Chief executive Oswald Grübel and Kaspar Villiger, chairman of the board, said the announcement of an out-of-court settlement between the Swiss government and the United States tax authorities would help the bank get back on track.

"This is a positive development in a matter that has adversely affected our efforts to regain the trust of our clients and to restore momentum to our business," Grübel and Villiger said in a letter to shareholders.

UBS had posted a goodwill loss of SFr492 million for the second quarter, pointing to the planned sale of UBS Pactual.

New net money

Total operating income increased at the bank from SFr5.77 billion, up from SFr4.97 billion last quarter. Total operating expenses increased nine per cent to SFr7 billion, up from SFr6.5 billion.

The bank's wealth and management Americas division recorded pre-tax loss of SFr221 million compared with SFr35 million for the first quarter. During the second quarter net new money outflows totalled SFr5.8 billion, compared with inflows of SFr16.2 billion for Q1.

Its wealth management and Swiss bank division, however, recorded a pre-tax profit of SFr932 million, down from a profit of SFr1 billion for early 2009.

The investment bank sector was also down, having posted a loss of SFr1.8 billion. Last quarter the group posted a loss of SFr3.16 billion.

swissinfo.ch and agencies

Key facts

UBS Q2 figures:

The group made a net loss of SFr1.4 billion.
The red figure stemmed mainly from restructuring costs and credit charges.
The result also included a goodwill impairment charge of SFr582 billion related to the sale of UBS Pactual, which should close next quarter.
UBS reported net new outflows of SFr39 billion in wealth management divisions.
The bank's tier 1 ratio, a measure of a bank's ability to weather losses, stood at 13.2%. The sale of UBS Pactual should increase that ratio to 13.7%.

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UBS and the US

On May 14, 2008, former UBS employee Bradley Birkenfeld and a Liechtenstein businessman were charged by the US authorities with helping an American billionaire avoid paying taxes on $200 million of assets deposited in Swiss and Liechtenstein bank accounts.

Birkenfeld turned whistleblower, giving details of UBS private banking practices to US prosecutors.

In July, a Miami court authorised the Internal Revenue Service to issue a summons on UBS demanding the release of confidential information on clients the agency suspected of tax evasion.

In the same month, UBS told a congressional hearing that it would stop offshore banking activities for US clients.

UBS agreed to pay $780 million and name some United States clients to resolve criminal fraud charges against it.

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