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UBS reports big fall in profits after rogue trading scandal

Profits were down 76% in the fourth quarter of 2011 as Switzerland’s biggest bank continued to struggle with the effects of a bn rogue trading scandal and economic weakness in Europe and abroad

UBS, Switzerland’s biggest bank, has reported a 76% drop in net profits during the fourth quarter of 2011 compared with the same period in 2010, a sign of continued struggles linked to its bn (£1.3bn) rogue trading scandal and economic weakness in Europe and abroad.

Profits at the Zurich-based bank fell to 393m Swiss francs (£270m) in the fourth quarter of 2011, compared with the same quarter in 2010 when net profits were SFr1.29bn. Those quarterly profits were later increased to SFr1.66bn due to tax gains.

UBS’s investment bank reported a second consecutive quarterly pre-tax loss of SFr256m, compared with a pre-tax profit of SFr100m in the same quarter of 2010.

The bank reported cost-cutting reductions of SFr2.1bn along with cuts in its bonus pool of 40% compared with a year ago. It said there had been an improvement of more than SFr50bn in net money flowing to its key wealth management businesses due to net inflows from the Americas, Asia Pacific, emerging markets and “globally from ultra high net worth clients”.

UBS’s chief financial officer, Tom Naratil, told reporters the bank had established a “rock solid foundation” of capital, liquidity and funding – its main business goals.

“We have the strongest capital position of our peer group,” Naratil said of the industry-wide requirements for banks to increase their capital cushion. And despite it being a “difficult” year for the bank and the industry as a whole, he said, the bank delivered a full-year pre-tax profit of SFr5.5bn for the year.

He said the bank foresaw strong headwinds for growth and gains in early 2012 due to Europe’s sovereign debt crisis and issues with the US federal budget deficit, the European banking system and continued uncertainty about the global economic outlook.

It will take a resolution of the debt crisis in Europe “for client confidence to fully return”, he added.

British and Swiss financial market authorities have begun enforcement proceedings against UBS over its massive rogue trading loss last year. Such proceedings can result in regulators demanding changes in the way a bank operates and UBS has said it would fully co-operate with the regulators.

Former UBS trader Kweku Adoboli, 31, was arrested in September on charges of committing fraud that cost the bank over bn. He has pleaded not guilty to two counts of fraud and two counts of false accounting between 2008 and 2011.

Naratil said the bank’s safety and soundness should be reassuring to clients and “the trading incident is not something that clients are talking to us about today”. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds