UBS displays caution after quarterly profits are held back

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The Swiss-based banking group UBS was cautious over the outlook for its investment bank after a lull in trading crimped its third-quarter profit. But the world's seventh-largest bank is set to outperform last year, having already earned 94 per cent of 2003's net profit by the end of September, with its flagship wealth-management business doing well.

UBS's finance chief Clive Standish said yesterday: "2004 as a whole will probably be one of our best-ever years." He was guarded over the outlook for the investment bank, saying there were "plenty of reasons to be cautious" about the prospects for markets and that investor activity had yet to pick up. "A very clear outcome of the US election would be helpful," he said.

"The investment banking component of our result has indeed pulled back, but this is broadly in line with the pull-back we've seen across the whole market."

The Swiss bank's net profit fell to 1.671bn Swiss francs in the three months to September, from Sfr1.685bn in the same period a year ago. Higher asset-management fees cushioned declines in bond and stock trading of about 20 per cent. Pre-tax profit at UBS's investment bank, which accounts for about 40 per cent of overall revenue and earnings, fell 19 per cent to Sfr714m. Revenues from fixed income were down 15 per cent from a year ago, while income from the equity business dropped 6 per cent.

However, earnings at the bank's wealth-management unit, which caters for the world's rich, rose 20 per cent from a year earlier to Sfr855m, helping to offset the weakness in investment banking.

The asset management businesses, which account for more than half of UBS's earnings, drew in a total of Sfr20.5bn in net new money, with Sfr16.7bn from wealth-management clients worldwide. The higher inflow boosted management fees to a record.

Marcelo Amram, an analyst at Société Générale, said he would lower his forecast for the investment banking unit, but added that all the other divisions were in line with his predictions.

UBS shares closed up Sfr2.45 at Sfr89.95.