UPDATE 3-UBS stops client outflows but weak trading hurts

* Q3 net profit 1.664 bln Sfr vs 1.225 bln Sfr in poll

* Net client inflows around 1.2 bln Sfr vs Q2 outflows

* Investment bank pretax loss 406 mln Sfr vs Q2 profit

* Tier 1 ratio 16.7 pct, vs end-Q2 16.4 pct

* Shares seen opening down 2.5 pct

(Adds share indication, analyst and CFO comments)

By Jason Rhodes

ZURICH, Oct 26 (BestGrowthStock) – Switzerland’s biggest bank UBS
has stopped bleeding client money for the first time since early
2008, meeting a key turnaround goal earlier than anticipated,
though investment banking reported a third-quarter loss.

Third-quarter net profit at UBS (UBSN.VX: ) (UBS.N: ) came in
higher than forecasts although that was due to a hefty tax
credit that neutralised an investment bank loss on the quarter’s
low trading activity that has also blighted other banks.

“Overall it’s a mixed bag. The net new money inflows are
clearly positive coupled with a strong balance sheet,” said
Sarasin analyst Rainer Skierka. “On the operational side, it
looks quite weak which is not that surprising given what we have
seen at Credit Suisse and the other banks.”

UBS was the second big European bank to report quarterly
figures after local rival Credit Suisse (CSGN.VX: ) (CS.N: )
disappointed investors last week with a big fall in net profit
as slow equities trading hit investment banking. [ID:nLDE69K03R]

Shares in UBS were seen opening 2.5 percent lower, according
to premarket data provided by bank Clariden Leu (CLPRE: ).

The stock has gained around 8.6 percent so far this year
after a hard fall in the credit crisis, to outperform a 20
percent fall in Credit Suisse and a 4 percent dip in the
European banks index (.SX7P: ).

The weak investment banking results set a worrying trend for
other European banks reporting later this week like Germany’s
Deutsche Bank (DBKGn.DE: ), as well as Spain’s BBVA (BBVA.MC: ) and
Santander (SAN.MC: ). [ID:nLDE69D0M7]


UBS, which needed a government bailout in the credit crisis
and was hit hard by a U.S. tax probe, was able to attract 1.2
billion Swiss francs of new client money to its wealth
management operations as Asian and super-rich clients entrusted
more of their cash to UBS, though there were no net inflows into
asset management.

But Chief Financial Officer John Cryan said he still wanted
to see a number of consistent and sustainable quarters of net
inflows to put wealth management’s difficulties behind it.

“Just because we’ve got a net positive quarter doesn’t mean
that we’ve resoundingly seen a turnaround,” he said.

U.S. tax authorities had said they would withdraw a
remaining summons seeking more client names on Nov. 15 after the
Swiss bank agreed to hand over details of thousands of wealthy
American clients it helped evade taxes, UBS said.

The strength of the Swiss franc against other currencies and
low client activity hit revenues in wealth management,
compressing margins in an industry already struggling to
maintain profitability.

Chief Executive Oswald Gruebel, who was dragged out of
retirement to turn around the bank, said UBS was on track to
meet its medium term goal of delivering an annual pretax profit
of around 15 billion francs.

“We are optimistic that an uptick in the fourth quarter
will benefit all of our business divisions. We remain confident
about our future,” he said.

The Swiss bank’s capital position remained strong as it
reported a Tier 1 ratio of 16.7 percent, against 16.4 percent at
the end of the second quarter.

UBS said at the end of last month it would need to keep
dividends on hold for some time to meet new capital requirements
without rising capital and avoid the need to raise fresh funds.
($1=.9694 Swiss Franc)
(Editing by Jon Loades-Carter and Louise Heavens)

UPDATE 3-UBS stops client outflows but weak trading hurts