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This recovery may be brief

A YEAR into his turnaround mission, chief executive Oswald Gruebel appears to have earned the right to say the bank is “back in business again.”

The Swiss bank’s first quarter pre-tax profit of SwFr2.81bn (£1.69bn) thrashed analyst expectations of SwFr2bn, and the net loss of SwFr1.98bn in the 2009 quarter.

But there is one key figure to take note of – customer withdrawals. Net outflows amounted to SwFr18bn in the January to March period, a significantly slower rate than the SwFr56.2bn net outflow in the last three months of 2009, but it means that customers are still withdrawing more money than they deposit with the bank. Meanwhile, the bank is mired in an ongoing tax dispute with the US over allegations that the bank helped Americans hide money from the Internal Revenue Service.

A landmark deal that involved UBS handing over 4,450 sets of UBS client data from alleged tax offenders appeared to resolve the problem, but a Swiss court ruled that it broke Swiss law. A vote this June will decide the matter. A rejection will lead the US to pursue UBS clients, and likely to once again accelerate withdrawals.

“Back in business?” Not yet. This recovery could be short-lived.