Tuesday, February 10, 2009

UBS reports $7 billion loss

UBS posted the biggest ever annual loss for a Swiss firm on Tuesday, but said client withdrawals reversed in January and it will axe 2,000 more jobs as it restructures to focus on wealth management.

UBS reported a $7 billion net loss in the fourth quarter, missing a Reuters poll forecast for $6.1 billion. UBS's loss for 2008 came in at $17 billion, above analysts' predictions for $16.2 billion.

The quarterly loss came on the back of a hefty $7.6 billion trading loss, as well as charges it made after selling billions in toxic assets to the Swiss National Bank when it was rescued by the state in October.

Chief Executive Officer Marcel Rohner told journalists that the world's biggest wealth manager was not paying a 2008 dividend but still aims to return to profit in 2009 after seeing some positive signs at the start of the year.

"While we leave a bad year behind us... we can nevertheless report substantial progress," Rohner said.

"Our businesses are well positioned for a challenging future. We had an encouraging start into the new year but the environment will remain difficult and volatile as the real economy has not seen (the) worst yet."

UBS continued to suffer massive outflows in the fourth quarter at its core wealth management business. But the Swiss bank said net new money had turned positive in both wealth management and asset management in January, the first time after a streak of negative quarters. It did not give details.

"In its outlook statement UBS indicates a strong start into 2009 and a reversal of the money flows. We remain skeptical as the clean-up of the mess will take several quarters," Dirk Becker, Kepler Capital Markets analyst, said in a note.

UBS stock swung sharply in early trade, rising as much as 7% before dipping 2% to trade at $10.93 by 4:10 am ET, broadly in line with a 2.3% weaker DJ Stoxx European banking index.

Vontobel analyst Marcel Staub said investors would continue to shun the stock as long as uncertainties remained: "We will have to wait-and-see if management's (overly) optimistic statement regarding the beginning of the year will be enough. Its comments three months ago were similarly positive."

UBS also announced structural changes to refocus the bank on its core Swiss businesses, its global wealth management operation and on the growth potential of its onshore business.

It is creating two new business divisions: Wealth Management & Swiss Bank under the leadership of Franco Morra and Juerg Zeltner, and Wealth Management Americas, led by Marten Hoekstra. All three are members of the board.

UBS said it was continuing to cut the size of its troubled investment bank, saying it aimed to bring its total staff to about 15,000 from 17,171 now.

Rohner, who said the fourth quarter had seen the "worst environment ever for investment banking", said the bank's total staff should fall to around 75,000 by mid-2009 from 77,000 now.

UBS said its Tier 1 capital ratio, a key measure of financial strength, rose to 11.5% at the end of 2008 from 10.8% at the end of the third quarter.

The Swiss bank giant, which made nearly $49 billion of writedowns in the credit crisis, said it had suffered new money outflows of $50.3 billion at its prized wealth management unit, compared to $42.4 billion the previous quarter.

It said it saw wealth management outflows in all regions, except the United States, where it hired nearly 400 financial advisers in the quarter. Source have told Reuters that UBS (UBS) is aggressively poaching advisers from rivals including Morgan Stanley (MS, Fortune 500), Merrill Lynch & Co and Citigroup Inc (C, Fortune 500)'s Smith Barney.

Outflows also continued from its global asset management business in the fourth quarter, but slowed to $23.9 billion from $29.7 billion the previous quarter.

UBS did not give details of whether it was inching towards a settlement in a high-profile U.S. investigation into possible tax fraud, in which the Swiss bank is accused of helping rich Americans hide untaxed money in offshore accounts.

The company decided to stop providing offshore banking services to U.S. citizens last year.

Separately, the Swiss National Bank said it had brought down the number of toxic assets eligible for transfer to a special central-bank run fund announced in October to help prop up UBS to $39.1 billion from $60 billion.

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