Clients ditch UBS following new tax rules

UBS could lose about 10 per cent of its European client assets as a result of deals Switzerland is striking with other countries over untaxed secret bank accounts.

The bank, which confirmed ambitious medium-term goals yesterday, said up to SwFr40bn (£26bn) were at risk from changes in tax regulations.

Switzerland agreed last month with Germany and Britain to resolve the issue of untaxed accounts and to impose a withholding tax on future deposits. It is expected to seal similar deals with other European nations imminently.

UBS faces demands for clients’ unpaid tax and the possibility of more clients withdrawing money from offshore accounts.

The bank said clients from Austria, Britain, France, Germany and Italy had already withdrawn SwFr20bn from its accounts in the past 12 months, according to slides in an investor presentation in London.

“We believe that SwFr15-40bn are still at risk as a result of changes in tax regulations,” said Juerg Zeltner, head of UBS wealth management, adding the bank had SwFr320bn invested client assets in Europe at the end of September.

However, UBS said it remained on track to reach an annual pre tax profit of SwFr15bn by 2014 at the latest, despite a shock third-quarter investment banking loss due to low client activity after UBS cut risky but potentially lucrative proprietary trading.

Investment bank head Carsten Kengeter said UBS was well placed to benefit from an upturn in client activity after hiring new staff, though trading growth would also mean more risk.

Separately the Swiss government said US tax authorities had withdrawn a summons against UBS after the bank was forced to hand over details of 4,000 accounts of clients suspected of tax evasion.