UBS stops bleeding client money

City A.M. Reporter
Switzerland's biggest bank UBS has stopped bleeding client money for the first time since early 2008, meeting a key turnaround goal earlier than anticipated, though investment banking reported a third-quarter loss.

Third-quarter net profit at UBS was 1.664bn Swiss francs (£1.09 bn), the world's second-largest wealth manager said, beating a forecast of 1.225bn francs in a Reuters poll even as low trading activity ate up investment bank earnings, as at other rivals.

UBS, which needed a government bailout in the credit crisis and was hit hard by a US tax probe, was able to attract 1.2bn Swiss francs of new client money to its wealth management operations as Asian and super-rich clients entrusted more of their cash to UBS, though there were no net inflows into asset management.

But the strength of the Swiss franc against other currencies and low client activity hit revenues in wealth management, compressing margins in an industry already struggling to maintain profitability.

"We are optimistic that an uptick in the fourth quarter will benefit all of our business divisions. We remain confident about our future and believe that we are on track to achieve our medium-term goals," said Chief Executive Oswald Gruebel, who was dragged out of retirement to turn around the bank.

UBS aims to deliver an annual pretax profit of around 15bn francs in the medium term.

The Swiss bank's capital position remained strong as it reported a Tier 1 ratio of 16.7 per cent, against 16.4 per cent at the end of the second quarter.

UBS said at the end of last month it would need to keep dividends on hold for some time to meet new capital requirements without rising capital and avoid the need to raise fresh funds.

UBS was the second big European bank to report quarterly figures after main local rival Credit Suisse disappointed investors last week with a big fall in net profit as slow equities trading hit investment banking.