UBS shares soar after profits boost
Radical restructuring plan puts Swiss bank back on track
SWITZERLAND'S UBS posted strong second-quarter results yesterday with the performance of the investment bank unit contrasting with recent weak performances at US banking giants Goldman Sachs and Citigroup.
Shares in UBS jumped 10pc as investors said chief executive Oswald Gruebel's tough restructuring strategy was producing results.
The largest Swiss bank, which was hit by the credit crisis and a tax probe, was also able to slow a bleeding of client money to its lowest level since it started to lose assets in early 2008, and Mr Gruebel said he was confident he could stop outflows by year end.
"We have fared well through the euro crisis thanks to our good risk management approach," said Mr Gruebel, a former Credit Suisse CEO who was pulled out of retirement in 2009 to lead UBS.
"Our results look reasonably good compared to our peers. I am confident we can stop the client outflows this year."
UBS turned in an after-tax profit of €1.5bn, its third quarterly profit in a row after a string of big losses in 2008 and 2009. It was well above forecasts for €972m.
"We have seen a turnaround in investment banking that was not expected so early. These are good numbers in terms of outflows, which have stabilised," said Francois Savary, chief investment officer for the private banking unit of Reyl.
"Mr Gruebel was hired to produce a turnaround at UBS and he is delivering."
UBS said clients drained a total of about €3.6bn at the Swiss bank's wealth and asset management units, sharply down from outflows of €13bn in the first quarter.
"Overall, UBS posted better-than-expected 2Q10 results with better revenue streams especially from investment banking and wealth management as well as a slightly lower cost base and a lower amount of one-off items," said Teresa Nielsen, an analyst at Vontobel.
The bank's investment unit, which accounted for half of UBS's pre-tax profit, reported a smaller decline in trading revenue than the average of its rivals as the European sovereign debt crisis made clients reluctant to trade.
Chief financial officer John Cryan said the bank wants to expand its investment bank further after the division's strong second quarter results.
"The war for talent has meant that the cost of hiring has gone up significantly," Mr Cryan said. "I wouldn't expect that we'd be taking on enormous numbers, but we've been a net hirer for some time now. And we would still continue to look for people, particularly in sales and distribution in fixed income."