UBS says its next results will show worst is over

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The Independent Online

The Swiss banking powerhouse UBS hopes it has left the worst of the credit crunch behind, predicting a return to quarterly profit for the first time in a year when it announces its results next month.

Its chairman Peter Kurer told shareholders at yesterday's extraordinary general meeting that despite the recent volatile market, "UBS currently expects to report a small profit for the third quarter". The results will be published on 4 November. It has reported losses for the past four quarters.

Mr Kurer added that 2009 would be "an overall profitable year" and that the bank had sold off much of its US commercial and residential mortgage-related positions.

Reflecting on the banking problems in the US, he said: "I am happy to report that UBS has fared reasonably well through this turmoil of the last weeks. Neutral observers attribute this to the fact that we addressed many of the root causes of this crisis soon enough, through an early recapitalization of the bank and a far-reaching recalibration of our business model."

UBS has been one of the banks worst hit by the credit crunch in Europe, with total writedowns to August hitting $43bn, and recorded losses of SFr25.7bn. Yesterday's meeting came a day after news the bank could lay off up to 1,900 more investment bankers.

Huw van Steenis, an analyst at Morgan Stanley, said the announcement "offers the potential" of changing UBS from a story of markdowns to one of assessing its post-crisis earnings power.

"UBS has the potential to be a strong long-term winner – and strong cash generation and management vigour help – but we feel the multi-year deleveraging of the balance sheet and new Swiss regulations pose risks to earnings, capital and dividends," he added.

The group said yesterday that it had completed its governance overhaul following the annual general meeting in April, and has split its operations into three after admitting its "integrated" banking model had failed.

"The markets and the financial industry are in an extremely precarious situation. It looks now as if these conditions will last into 2009. This will influence the timing of recovery for the financial services industry generally and for UBS in particular," Mr Kurer concluded.