UBS AG, Switzerland’s biggest bank, reported a fourth straight quarterly loss on debt writedowns and the cost of settling a US probe into its sale of auction-rate securities.
The net loss was 358 million Swiss francs (US$329 million) in the second quarter, compared with a profit of SF5.55 billion a year earlier, the Zurich-based bank said in a statement yesterday. Earnings compare with the SF281 million median loss estimate of 14 analysts surveyed by Bloomberg. The loss was cushioned by SF3.8 billion in tax credits.
The bank plans to separate its business divisions into three “autonomous” units to increase “strategic flexibility.” Chief executive officer Marcel Rohner faces pressure to stem losses, shrink the investment bank and limit damage to UBS’ wealth management business, the world’s largest. Rich clients removed SF17.3 billion more than they added in the second quarter, the first net withdrawal in almost eight years.
“The investment banking division restructuring will take months to yield results,” said Elie Darwish, an analyst at Exane BNP Paribas, in a note before the earnings. He rates UBS “underperform,” citing “wealth management brand damage.”
UBS’ wealth management units, which oversaw SF1.84 trillion at the end of March, attracted an average of SF37.9 billion in each quarter last year. Analysts surveyed by Bloomberg had estimated net withdrawals would amount to SF5 billion in the second quarter.
UBS fell 50 percent so far this year in Swiss trading, the fourth-worst performance on the 71-company Bloomberg Europe Banks and Financial Services Index.
Rohner, 43, and chairman Peter Kurer, 59, have announced plans to cut 5,500 jobs, including 2,600 at the securities unit. Kian Abouhossein, an analyst at JPMorgan Chase & Co, said last week that UBS should eliminate an additional 15 percent of the investment bank’s more than 21,000 employees.
UBS brought in Jerker Johansson from Morgan Stanley in mid-March to run the division. Johansson, 52, in May took control of the firm’s fixed-income business from Andre Esteves, who ran it for less than 10 months and left in June.
A poorly timed bet on the US mortgage market led to more than US$38 billion in writedowns at the securities unit in the nine months through March, and SF25.4 billion of net losses, the most of any bank. UBS raised more than SF30 billion from shareholders and investors in Singapore and the Middle East to replenish capital eroded by losses.
“UBS has had a large number of write-offs and they’ve told us on a number of occasions that this is the end of it, and it hasn’t been,” said Roger Nightingale, global strategist at Pointon York Ltd in London.
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