PREVIEW-UBS seen curbing outflows as turnaround nears

* Q2 net profit seen at 1.34 bln Swiss francs, down from Q1

* Outflows to shrink to lowest level since early 2008

* Sovereign debt concerns likely to hit fixed income

* Swiss parliament backing of UBS tax deal a positive

By Lisa Jucca

ZURICH, July 23 (BestGrowthStock) – Client money withdrawals at UBS
(UBSN.VX: ) (UBS.N: ) were expected to be at their lowest level
since 2008 when the Swiss bank reports results on Tuesday, but
sovereign debt concerns will dent investment banking revenue.

A string of weak U.S. banking earnings and results posted by
Swiss competitor Credit Suisse (CSGN.VX: )CS.N> pointed to overall
weakness in the fixed-income business, the engine behind chief
executive Oswald Gruebel’s recovery strategy.

Analysts polled by Reuters expected Switzerland’s largest
bank by market value to post second-quarter net profit of 1.34
billion Swiss francs ($1.28 billion), a third less than in the
first quarter but bouncing back from a 1.4 billion loss a year
ago. [ID:nLDE66M0KQ]

Clients were expected to have drained a total of 11 billion
francs, the lowest quarterly withdrawal UBS has experienced
since it started to bleed assets at the start of 2008, but not
sufficient for Gruebel to say he has turned the tide.

“UBS’s first quarter was surprisingly good. But after the
batch of banking earnings I doubt UBS will not suffer this
quarter,” said WestLB analyst Georg Kanders.

On Thursday, Credit Suisse posted second-quarter profit (Read more your timing to make a profit.)
dragged down by its fixed income business as sovereign debt
fears hit markets, despite beating forecasts on strong equities,
and tax and accounting gains.[ID:nLDE66M0KQ]

UBS’s trading profit was forecast to halve to 1.3 billion
francs from the previous quarter, signalling Gruebel still
needed to prove the investment banking was back on track.

Factors such as 600-700 million francs of accounting profit
on its own debt will be nearly offset by a 300 million charge
for Britain’s bonus tax and a 150 million charge for
restructuring costs at UBS’s Wealth Management Americas
division, analysts said.


The Swiss parliament’s backing on June 17 of a U.S.-Swiss
tax deal crucial for UBS should help Gruebel, a former Credit
Suisse boss pulled out of retirement in 2009 to turn around UBS,
to reassure wealthy clients the bank has put last year’s
damaging U.S. tax fraud probe behind. [nLDE65G0EZ]

But the vote came too late in the quarter to have had a
significant impact in asset trends. “We expect confirmation of a
stabilisation in client advisor outflows and an improvement in
net new money outflows,” Vontobel analyst Teresa Nielsen said.

Gruebel said earlier this year he expected UBS to report
asset inflows again by the year-end. Kander said this may not
happen until the start of next year, adding: “The focus remains
on the issue of net new money”.

Client reluctance to invest in complex products or
alternative investments such as hedge funds led to a shrinking
of Credit Suisse’s gross margins to 121 basis points in wealth
management at the end of the second quarter.

But UBS’s gross margins, a key indicator of a private bank’s
profitability, should not suffer much as they are already at a
depressed level below 100 basis points, on average.

UBS shares have risen 8 percent this year, outperforming an
4.5 percent fall in the broader European STOXX 600 banking index
(.SX7P: ).

Stock Market Research Tools

(Editing by Dan Lalor)
($1 = 1.045 Swiss francs)

PREVIEW-UBS seen curbing outflows as turnaround nears