Zurich: Swiss bank UBS said it did not expect an immediate recovery of client inflows after a higher-than-expected accounting charge and withdrawals at all its key divisions pushed it into another quarterly loss.
The net loss of 564 million Swiss francs ($552.4 million) was UBS’ fourth consecutive quarterly loss, narrower than a net loss of 1.4 billion Swiss francs in the second quarter but larger than average analyst forecasts for 207 million. “We do not expect an immediate recovery in client net new money flows,” UBS said in a statement.
Analysts had been looking for signs of recovery at UBS’ core wealth management division, which has suffered persistent outflows while it struggled to emerge from the subprime crisis and was also hit by a high-profile US tax row.
“Another big disappointment. The outflow of client assets is continuing. The loss is bigger than expected. The shares should come under heavy pressure,” said one Zurich-based trader.
Profitability at UBS’ investment bank improved in the quarter but was overshadowed by accounting charges totalling 2.15 billion francs, including an own credit charge of 1.436 billion and a net loss of 409 million on its sale of it Brazilian Pactual business.
UBS’ results contrast with stellar profits seen at European peers Credit Suisse and Deutsche Bank as UBS has exited several business lines while pushing through a tough restructuring.
Client outflows at UBS’ Wealth Management and Swiss Bank division, which serves Swiss domestic and offshore clients, were 16.5 billion francs, little changed from the previous quarter, but worse than average analyst forecast for 9.5 billion.
Outflows at the Americas wealth management division accelerated to nearly 10 billion francs from about 6 billion francs in the previous quarter as UBS’ reputation suffered in the region during the bitter US tax row.
In asset management, UBS saw 10 billion francs of client withdrawals, an improvement from the 17.1 billion in the previous quarter but more than the 6.8 billion average analyst forecast.
UBS’ Tier 1 ratio, a measure of a bank’s financial strength, rose to a solid 15.0 percent at the end of third quarter against 13.2% the previous quarter.
A year earlier, UBS turned a small quarterly profit, mainly due to tax credits, but still ended 2008 with the biggest annual loss in Swiss corporate history.
Shares in UBS have gained around 16 percent since the start of the year, while shares at Credit Suisse, now slightly larger than UBS by market value, have nearly doubled. The DJ Stoxx European banking index has gained nearly 50% this year.