UBS profits surge but Wuffli stays cautious

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The Independent Online

UBS, Europe's biggest investment bank, yesterday painted an upbeat picture about the state of the global economy and sentiment among investors, reporting a surge by more than a third in profits to 1.64bn Swiss francs (£748m). The good result vindicated UBS's president, Peter Wuffli, who said in May that three years of falling equity prices had come to a halt, calling an end to the bear market.

However, Mr Wuffli tried to contain expectations for the rest of the year, saying that his optimism was "tinged with caution".

"Investors remain concerned about future economic prospects, and confidence in the financial markets has not yet fully been restored," Mr Wuffli said. He added that the "near perfect" conditions in fixed-income trading that had boosted income were unusual, and he warned investors not to be surprised if the second half of the year turned out to be not as good.

UBS, which has dropped the famous "Warburg" part of its title, said net profit was up by 35 per cent compared to the first quarter and 23 per cent on the year-earlier period, when adjusted for the sale of its US clearing business.

UBS's results came a week after Credit Suisse posted a surprise leap in second quarter profits to Swfr1.3bn, underlining how important the upturn in world markets has been for a sector battered by falling earnings and job cuts.

Analysts said UBS's results had allayed some fears that the bank was unlikely to fare as well during an upturn as it did during the downturn of late.

"I think they are very well positioned because they have a solid equity franchise and they have made excellent progress in their mergers and acquisitions business, and a market upturn will benefit their private banking and asset management operations," said Mark Hoge, at Lehman Brothers.

Quarterly pre-tax profit at UBS's investment bank more than doubled from a year ago to Swfr981m. UBS, which has largely refrained from the mass job cuts that were seen at many other banks, said it had continued to keep a tight grip on costs over the quarter, cutting operating expenses by 7 per cent from a year ago. Assets under management rose to Swfr2,168bn at the end of June from Swfr1,994bn at end-March, as markets firmed. However, net new-money inflows eased quarter-on-quarter to Swfr14.4bn from Swfr17.1bn.