UBS reports big jump in profits and plans to buy back central bank fund

Swiss bank UBS has reported a 32 per cent increase in second quarter profits after solid gains in its investment banking division, and has announced plans to buy back equity in a fund set up by the central banks as part of its bailout in 2008 (report).

Switzerland’s largest bank reported an adjusted pre-tax profit of CHF1.022bn (£720m) and a diluted earnings per share of CHF0.18. These estimate-beating results came despite an $885m settlement with the Federal Housing Finance Agency in the US over claims related to the sale of mortgage backed securities.

It now expects to exercise its option to acquire the SNB StabFund’s equity in the fourth quarter of 2013, which it hopes will boost its capital in the latter part of the year. The Swiss government sold its nine per cent stake in UBS a year after bailing it out for a CHF1.2bn profit, but the bank has been offloading around $38.7bn of toxic assets into the National Bank-managed fund ever since.

Meanwhile, the investment banking business said it made a pretax profit of CHF775m – up from a CHF92m loss last year. Net income was up to CHF690m from CHF524m.

Its wealth management business – the cornerstone of its revamp – posted an 11 per cent jump in earnings to CHF557m and reported its highest profit in four years excluding charges related to the Swiss-UK tax agreement and restructuring costs.

Looking forward, the bank expects client confidence and activity to be hit by the “continued absence of sustained and credible improvements to unresolved European sovereign debt and banking system issues and US fiscal issues, and by the mixed outlook for global growth”. Taken with the lull usually experienced over the summer holiday season, headwinds for growth are expected.

Nevertheless, we remain confident that our wealth management businesses will continue to attract net new money, reflecting new and existing clients’ steadfast trust in the firm, and that the actions we have taken will ensure the firm’s long-term success and will deliver sustainable returns for our shareholders going forward.