Swiss bank UBS AG reported a first-quarter net profit of 2.2 billion Swiss francs ($2 billion) Tuesday on a strong performance by its trading division, lower costs and fewer customer withdrawals.
The bank's best results in almost three years beat analysts' expectations for a net profit of 2 billion francs. UBS had recorded a net loss of 1.98 billion francs ($1.84 billion) in the same quarter last year.
Euphoria was dampened somewhat by the fact that part of the gains came from freed-up reserves, noted analysts at Zuercher Kantonalbank.
UBS shares were down 1.8 percent at 16.73 francs ($15.33) on the Zurich exchange.
The bank's chief financial officer said improved client confidence and staff morale helped drive profits during the quarter.
"Now that we're back reporting some profits I think clients can have more confidence in us, and there are definite signs of that being the case," John Cryan said in a conference call. "That has the positive effect of boosting the morale of the client advisers."
The Zurich-based bank is still struggling to rebuild customer trust following its massive losses during the financial crisis and an ongoing tax evasion dispute in the United States.
Customers continued to withdraw more money than they deposited in the Jan.-March period, but at a slower rate than during previous quarters. Net outflows amounted to 18 billion francs compared with 56.2 billion francs in the last three months of 2009.
So-called net new money — a closely watched indicator of future business in the banking industry — was positive in Asia and among ultra-rich clients, Cryan said. He said the end of a tax amnesty in Italy also helped stem withdrawals.
UBS hopes net new money flows will return to positive territory in the course of the year, he added.
The investment banking unit recorded a first-quarter pretax profit of 1.2 billion Swiss francs as traders took advantage of favorable market conditions.
Rivals such as Credit Suisse Group, JPMorgan Chase & Co. and Goldman Sachs Group Inc. also recently reported healthy earnings from their trading divisions and some analysts had expected UBS to do even better than it did, especially after it announced earlier in the year that its Fixed Income, Currencies and Commodities unit FICC was on course for strong first-quarter results.
UBS staff costs were lower overall during the quarter but the hotly debated bonuses to traders and advisers increased. Shareholders had lined up at the bank's annual meeting last month to criticize the massive bonuses paid to senior executives, though a majority voted in favor of the board's compensation proposal.
The bank's outlook for the second quarter was positive, with chief executive Oswald Gruebel stating that UBS was "well positioned to meet our medium-term goals." But it warned that markets might stumble over concerns about the ability of Greece and other European countries to repay substantial debts.
UBS itself has no significant exposure to Greek, Spanish or Portuguese debt, Cryan stressed.
"We're sleeping very well at night in relation to sovereign debt throughout Europe," he said.
Cryan also said the bank was doing "absolutely everything we can" to resolve its long-running dispute with U.S. tax authorities.
The bank has agreed to turn over some 4,450 names of wealthy Americans suspected of dodging taxes through secret UBS accounts, but that agreement is being held up by the Swiss courts and parliamentarians wary of signing away the country's storied tradition of banking secrecy.
UBS said it expects to meet new rules announced last month by Switzerland's financial regulator FINMA requiring major banks to hold enough cash and high-quality assets to be able to withstand a crisis for at least 30 days. The new rules come into effect June 30.
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