UBS hopeful on outflows, warns on Q4
UBS AG said a government bailout is helping to stem client money outflows but warned that it could take a 6 billion Swiss franc ($5.20 billion) hit in the fourth quarter due to accounting effects.
The world’s largest wealth manager had already reported most of its third-quarter figures, including a small profit, last month when it announced it was getting a 6 billion franc capital injection from the government and was also unloading $60 billion of risky assets into a central bank fund.
UBS, one of the European banks hit hardest by the financial crisis, said on Tuesday it had seen some improvement in client flows since the central bank deal. It reported net outflows of 83.6 billion francs in the third quarter.
“Whilst the situation was very difficult at the start of October, there have been encouraging signs for net new money flows following the announcement,” it said.
UBS shares were up 0.2 percent to 18.99 Swiss francs at 1040 GMT, compared with a 2.2 percent stronger Dow Jones index of European bank stocks. The stock is down nearly 60 percent since the start of the year, slightly underperforming the European index which is 52 percent lower this year.
“Management claims the trends after the settlement with the Swiss National Bank have been encouraging, but we have seen these statements before,” said Dirk Becker, analyst at brokerage Kepler Capital Markets.
“Our impression is that it might take a while before UBS gets back to meaningful inflows.”
The Swiss bank, which suffered massive damage to its reputation in the subprime crisis and is under pressure at home to return executive bonuses, said it expected market conditions to remain “challenging” and shrinking client assets to affect fees cash til payday loan.
UBS, which has changed its top management this year and is undergoing a massive restructuring, will give an update on client flows at an extraordinary shareholder meeting on November 27, Chief Financial Officer John Cryan told an analysts’ call.
Q4 HIT BY CHARGES, REVERSAL OF CREDIT GAINS
Cryan said the bank was sticking to its goal of returning to profit in 2009 while continuing to reduce its huge balance sheet. But he said he expected it to take a 2 billion Swiss franc hit in the fourth quarter if its funding costs remain at current levels.
UBS also expects a charge of about 4 billion francs on equity sold to the central bank fund in the fourth quarter.
“The total loss is about 6 billion Swiss francs. It cannot be offset by new revenues. They will show a loss in the fourth quarter,” Georg Kanders, an analyst with WestLB, said.
Cryan said UBS will also be affected by goodwill and restructuring charges in the fourth quarter.
UBS confirmed on Tuesday it had made a third-quarter net profit of 296 million Swiss francs ($256.3 million), helped by a gain on its own credit of 2.2 billion francs, plus a tax credit of 913 million francs.