Swiss bank UBS reported a better-than-expected third-quarter net profit today but warned the tough trading conditions that hit its investment banking income looked set to continue unless the global economy improved.
The bank said its core wealth management business had held up well despite a trading scandal which had lost the bank 1.8 billion Swiss francs and reported a big accounting gain which offset that loss.
In the absence of better economic conditions "current market conditions and trading activity are unlikely to improve materially, potentially creating headwinds for growth in revenues and net new money," the bank said.
UBS said an ongoing internal investigation into the unauthorised trades uncovered last month had shown its controls had not been effective. It said it had found two control shortcomings related to trading counterparties, and that it was taking measures to address them.
Chief financial officer Tom Naratil said the bank was working on plans to restructure the investment bank ahead of an investor day on November 17th and would only give details on possible new cuts then after it announced in August 3,500 jobs would go.
Net profit fell 39 per cent to 1.018 billion francs, beating average analyst forecasts for 276 million francs and steady from the 1.0 billion francs it posted in the second quarter, already hit by falling trading volumes.
"The figures are better than expected, even though they massaged them somewhat. But the result is still good. Wealth management is going very well and I think that will be the direction they want to push the bank in," said one trader.
The bank, which already said the trading scandal had not resulted in many clients withdrawing their money in the quarter, reported wealth management net inflows of 7.8 billion francs, down from 8.2 billion in the previous three months.
That included 4 billion francs of net inflows in its Americas wealth management business, up from 2.6 billion the previous quarter, while the European offshore business - under pressure due to tax deals - reported net outflows. Naratil declined to comment on client trends in the current quarter.
