UBS posts 58 percent second-quarter net profit drop


Wed, Aug 01, 2012 - Page 15

Swiss banking giant UBS AG posted second-quarter net profits of 425 million Swiss francs (US$434.16 million) yesterday, a sharp plunge from the SF1.02 billion it posted in the comparable period a year ago.

Hit by lower trading revenue and fewer commissions and client fees, Switzerland’s largest bank said the 58 percent drop in net profit reflects “challenging conditions marked by increased volatility and greater client caution.”

The Zurich-based bank emphasized the effect of the eurozone debt crisis and the poor economic outlook globally.

UBS chief executive Sergio Ermotti told investors in a statement that going forward UBS would continue to focus on “prudent liquidity management, further reducing risk-weighted assets and delivering the best possible service to our clients.”

However, the bank said it had surpassed requirements to increase its capital cushion and prudently cut costs that should lead to better results by the end of next year.

UBS is cutting about 3,500 jobs, and had 63,520 staff at the end of June.

The bank’s outlook remained cautious, even as it expressed confidence that it would continue to attract net new assets. Its report warned it could face “headwinds for revenue growth, net interest margins and net new money” if it failed to make progress on key issues and third-quarter market activity levels fall as they usually do.

Meanwhile, Deutsche Bank also said earnings fell 46 percent in the second quarter as the eurozone debt crisis hurt investment banking activity and revenue from trading securities.

Germany’s largest bank said yesterday that income fell at its investment banking division as fewer client companies came to the bank for its services helping them issue shares.

It also said that revenue from trading debt securities — one of the investment categories most affected by the crisis — was down. The company said that was partly because it had been taking -“deliberately lower levels of risk” due to subdued trading volumes.

Net earnings fell to 661 million euros (US$811 million) from 1.233 billion euros in the same three months a year ago.

Revenues were down 6 percent to 8 billion euros. A major hit to revenue came in the corporate banking and securities division, where share underwriting and debt trading are located, falling by 451 million euros to 3.5 billion euros.

The earnings statement yesterday was the first reported under new co-chief executives Anshu Jain and Juergen Fitschen, who took over from Josef Ackermann in May.

“The European sovereign debt crisis continues to weigh on investor confidence and client activity across the bank,” it said.