UBS posts loss despite possible US tax deal

SWISS BANK UBS posted another big loss in the second quarter as wealthy clients were scared off by a US tax row, but said it hoped to start winning back trust now that a US deal was in sight.

UBS said it remained cautious about its prospects, given the economic environment, but after taking out one-off restructuring and other charges of 2.3 billion Swiss francs (€1.5 billion), it made an operating profit of 971 million francs, its best in eight quarters.

The bank posted a net loss of 1.4 billion francs, compared with an average forecast from analysts in a Reuters poll for a loss of 1.1 billion francs, and suffered 39.4 billion francs of outflows at its wealth and asset management divisions.

Chief executive Oswald Gruebel said a deal UBS struck with the US government last Friday to settle their tax dispute should help reverse outflows as the bank rebuilds its reputation, although recovery would take more than a quarter. “We certainly think we will reverse the trend in outflows,” Mr Gruebel said.

UBS is expected to finalise the deal this week. It is not expected to have to pay a fine for helping US clients dodge taxes but could hand over 5,000 names of secret account holders, compared with the 52,000 Washington is seeking.

Mr Gruebel declined to comment on the details of the deal but chief financial officer John Cryan said the bank had made no additional provision for settling the US litigation.

“UBS posts mixed results . . . In our view, the market is pricing in UBS turning back to profitability levels similar to peers too quickly,” said Kepler Capital Markets analyst Mathias Bueeler. “The investment bank is simply not taking advantage of improved market conditions to the same extent as peers. Especially in fixed income, a market that is thriving currently, UBS remains behind peers.”

Mr Gruebel said it would take six to 12 months to rebuild the UBS fixed-income business.

However, outflows slowed at the wealth management and Swiss bank business, to 16.5 billion francs from 23.4 billion in the first quarter. – (Reuters)