UBS outflows spoil Grübel’s profits party

UBS reported a return to profitability yesterday, but there were few celebrations as the Swiss bank revealed a haemorrhaging of private client money in the fourth quarter.

Outflows almost doubled to SFr33.2bn (£20bn) after an aggressive Italian tax amnesty added to deeper problems associated with the international crackdown on banking secrecy. UBS chief executive Oswald Grübel said more outflows were expected “in the immediate future”, leading analysts to warn of bleeding until at least the end of this year.

The institution generated net earnings of SFr1.2bn in the three months to December, its first black figure since Grübel took over a year ago. The positive number, bolstered by a lower accounting charge on the bank’s own debt, contrasted with a SFr564m loss in the third quarter and reduced UBS’ full-year deficit to SFr2.7bn. Earnings per share were SFr0.3.

The bank said it would pay SFr3bn in cash bonuses, nearly a third up from 2009’s depressed handouts.

Chief financial officer John Cryan said: “The message is that there is light in the market and we are enjoying our position while there is light.”

Commentators were less enthusiastic, however. Elie Darwish of Exane BNP Paribas kept a “negative” rating, saying: “There is a big issue on the volume side in the private bank, but also on the margin side. At the end of the day you have to wonder whether UBS will ever get the valuation premium it used to do in the past.”

Mathias Büeler of Kepler Capital Markets in Zürich added: “There’s nothing to make you think this is a strong recovery story. It’s not going to be a quick fix.”

Exane BNP Paribas expects SFr5.5bn net earnings for full-year 2010, with earnings per share at SFr1.44.

Shares in UBS fell 5.4 per cent on the SIX?Swiss Exchange to close at SFr13.4 yesterday.