UBS disappoints despite strong showing by WDR

News Analysis: The euro may be bouncing back, but these are early days in a 10-year project

UBS, the Zurich-based bank formed by last year's merger between Swiss Bank Corporation and Union Bank of Switzerland, yesterday reported disappointing first-half profits despite a strong performance from the bank's London-based investment banking arm, Warburg Dillon Read.

Overall, UBS reported a 12.8 per cent gain in first-half profits, well below analysts' expectations of a 20 per cent increase.

Net profits for the period rose to Sfr3.96bn (pounds 1.6bn), including Sfr1.8bn in extraordinary income from disposals such as the sale of a 25 per cent stake in Swiss Life, the country's largest life insurer.

Pre-tax profits for the Warburg Dillon Read division were up by 37 per cent to Sfr1.54bn (pounds 634m). This includes an exceptional gain of Sfr200m from the sale of the unit's international trade finance business to rival bank Standard Chartered.

So far this year Warburg Dillon Read has advised Mirror Group on its pounds 2bn merger with Trinity, a deal that will create the UK's biggest newspaper company.

The investment bank also acted as adviser to car manufacturer Ford on its $6.45bn (pounds 4bn) acquisition of Swedish car maker Volvo.

In contrast to WDR's success, Phillips & Drew, UBS's London-based fund manager, lost a contract in April to manage pounds 600m of bonds for Marks & Spencer's pension fund. The group also lost its position as manager of a pounds 370m pension fund for the Whitbread drinks group.

UBS said it was "pleased with the results" and that the bank's performance was "well within expectations considering the background of an ambitious and challenging integration process".