UBS disappoints with investment bank loss

(BLOOMBERG)

UBS reported a surprise loss in investment banking yesterday that overshadowed news that fresh money was finally flowing into the Swiss giant's core private bank.

The investment banking business, which brought UBS to its knees during the financial crisis, suffered a Sfr406m (£260m) pre-tax loss in the third quarter because of sluggish revenues from equities and fixed-income trading and a big accounting charge on the value of the bank's own debt.

Pre-tax group earnings were below analysts' forecasts at Sfr818m, sending the shares down 5 per cent. UBS's private bank attracted Sfr1.2bn of new client money to its wealth management operations as rich clients entrusted more cash to Switzerland's biggest bank for the first time since early 2008.

The private bank bled almost Sfr400bn during the crisis as rich people fearful for the once rock-solid bank's future took their money out. The Swiss government had to bail out UBS as its investment bank racked up billions in losses from disastrous structured credit holdings.

The net new money at the private bank came earlier than analysts had expected, but John Cryan, the finance director, said the third-quarter inflows were small and possibly a one-off. He said he wanted to see a consistent net inflows over a number of reporting periods before declaring that the troubles of the bank's core wealth management business were well and truly over.

"Just because we've got a net positive quarter doesn't mean that we've resoundingly seen a turnaround," he said, adding that there were reasons to feel confident about the bank's prospects.

UBS was the second big European bank to report underwhelming quarterly figures after its Swiss rival, Credit Suisse, disappointed shareholders last week after its investment banking business was hit by slow equities trading.