UBS sees second-quarter profits rise but warns of tougher times ahead

UBS, the Swiss bank which caters for more of the world's wealthy than any other, reported yesterday that its wealth management profits came to the rescue of depressed investment banking operations in the three months to June.

UBS, the Swiss bank which caters for more of the world's wealthy than any other, reported yesterday that its wealth management profits came to the rescue of depressed investment banking operations in the three months to June.

The second-quarter net profit was Sfr1.97bn (£855m), 28 per cent more than the same period last year but 19 per cent lower than the record figure for the first quarter of this year, when investment banking was in overdrive.

Since then, though, dull markets and shrinking corporate activity have taken their toll. For the first six months of this year, the net profit was Sfr4.40bn, up 60 per cent on a year previously. Peter Wuffli, the chief executive, said he was satisfied with the quarterly performance, which was slightly above analysts' predictions.

He said: "Halfway through 2004, we can see that the markets' astonishing start to the year has settled into a more normal rhythm. In that context, this was a good quarter for UBS, demonstrating the importance of having the world's leading wealth management operation as a central part of our focused strategy.

"Since many of our businesses, especially our investment bank, have activity as an important driver, we should expect a return to a more normal seasonal pattern this year, with second-half revenues not matching those in the first half."

UBS shares rose 2.5 centimes to Sfr81.85. Profit at the private bank rose from Sfr656m a year ago to Sfr881m, while investment banking profits fell 8 per cent over the year to Sfr923m.

Operating income for the second quarter was Sfr9.48bn, 6 per cent ahead of the same period last year but 8 per cent behind this year's first quarter. Operating expenses, at Sfr6.90bn, were 2 per cent up on a year ago, 4 per cent below first-quarter 2004.

This left operating profit before tax and minority interest at Sfr2.59bn, 18 per cent up on a year ago, 16 per cent down on the first quarter.

Revenue from fixed income, rates and currencies fell by nearly a quarter to nearly Sfr2bn between the first and second quarters. Equity revenues were down 18.6 per cent at Sfr1.7bn. Private equity revenues were Sfr52m, a third of their first-quarter levels.

Clive Standish, the chief financial officer, said: "Strong asset-based fees from our wealth management and asset management franchises, alongside the progress of our corporate client franchise, have helped us to balance lower securities revenue."