Swiss bank UBS AG offered evidence of its recovery Tuesday with stronger-than-expected second-quarter profits of 2 billion Swiss francs ($1.9 billion), and said it should resolve all tax matters with the U.S. government by October.
The Zurich bank's results compared with a 1.4 billion-franc loss in the second quarter of 2009, and far exceeded analysts' forecasts, sending shares up 8.4 percent to 17.02 francs ($16.21) in Zurich trading.
UBS was boosted by a strong performance from its investment bank, whose pretax profit rose 10 percent to 1.3 billion francs at a time crosstown rival Credit Suisse and U.S. banking giants experienced a slowdown in the sector. The earnings were boosted by a 595 million-franc credit gain on financial liabilities.
"This was a good result in volatile market conditions, and demonstrates the progress we are making," UBS CEO Oswald Gruebel said. "I remain confident in our future and I firmly believe that we have the right strategy in place."
UBS, long the star of the Swiss banking industry, lost billions of dollars during the global economic crisis and the confidence of many investors during a lengthy tax dispute with the United States.
But it has recovered impressively in recent quarters under Gruebel, a former Credit Suisse chief. UBS said it expected an end to its U.S. regulatory problems now that the Swiss parliament has approved closer cooperation with the Internal Revenue Service, the U.S. tax collection agency. The bank has agreed to turn over 4,450 names of wealthy Americans suspected of dodging taxes through secret accounts.
UBS said it trimmed 4 billion francs in risky assets and improved its capital base in the April-June period. Its wealth management profits slipped 5 percent from the first three months of the year because of higher costs, but margins increased from their depressed levels.
The bank warned that doubts about the economic recovery could lead to subdued client activity later this year.
Customers continued withdrawing more money than they deposited in the second quarter, but at a far slower rate than over the past year. Net outflows in UBS' private banking business amounted to 5.2 billion francs, down from 8 billion francs in the first quarter.
Private brokerage Helvea said the one-off gains "slightly flattered" UBS' results, and noted that the bank continued to drop client advisers. It called the trend disappointing, but said the situation could improve "once all the negative publicity on UBS is out of the way."
UBS and Credit Suisse were given a clean bill of health last week by the Swiss financial regulator, which released findings from its "stress tests" to coincide with the results of a much larger examination by the European Union.
Credit Suisse Group also beat market expectations last week as it announced second-quarter net income of 1.6 billion francs.
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