Boom may be over, warns UBS

The Swiss investment bank UBS revealed yesterday that profits surged 47 per cent between April and June, but warned of tougher times ahead for the rest of this year.

Profits of more than Sfr3.1bn (£1.3bn) before tax were driven by sales of substantial stakes in companies such as the London Stock Exchange and Babcock & Brown, brisker trading, and a substantial increase in the money it manages for the rich.

UBS is the world's leading wealth manager, and profits there jumped 52 per cent to Sfr334m compared with the same period last year. Clients handed UBS Sfr31.2bn more to manage over the three months.

Investment banking delivered a 57 per cent improvement in profits, despite the turmoil that buffeted global equity markets at the start of the summer. Revenues from its equities division fell a fifth from the first quarter to the second, but analysts declared it "resilient" when set against rivals.

During the same period, Deutsche Bank's trading revenues tumbled 53 per cent and Credit Suisse's by 45 per cent. UBS is regarded as more cautious about higher risk, higher return proprietary trading than rivals such as Deutsche Bank, which lost €100m (£67m) trading on its own account in the second quarter.

However, UBS signalled yesterday that the difficult trading conditions of May had stretched into its next financial quarter when wider factors also threatened to undermine performance. It said: "Growing geopolitical concerns, combined with worries about the pace of future economic growth, inflation and the implications for monetary policy and interest rates, continue to affect investor activity and invested asset levels."

This could lead to a slowdown in the second half of the year, UBS added.