UBS Nets US$1.16 Billion Profit In Q3 Despite Rogue Trader Scandal

By: EW News Desk Team   Date: 26 October 2011

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26 October 2011

Swiss Bank UBS AG has reported a better-than-expected third quarter net profit of 1.02 billion Swiss francs (US$1.16 billion) in their quarterly earnings statement on Tuesday, despite taking a 1.849 billion franc loss last month due to a rogue trading scandal.

While net profit for the company fell by 39 percent to 1.018 billion francs as compared to the same quarter last year, the quarterly results still spelled good news for the company and its investors after it had earlier warned in the immediate aftermath to the scandal that it might have to report a loss for the third quarter, before changing its assessment a few days later to just a “modest net profit.”

According to the bank, an accounting gain coupled with returns from the sale of treasury-related investments helped to offset the losses from the scandal. UBS also recorded an income tax benefit of 40 million francs, with an additional 4.9 billion francs worth of net new money.

Still despite the results, the report from UBS echoed its US counterparts in showing declining bond and stock revenues as concerns continue to escalate over sovereign debt problems.

“Current market conditions and trading activity are unlikely to improve materially, potentially creating headwinds for growth in revenues and net new money,” UBS said in a letter to shareholders. However, the bank added that a plan was already in place that would allow them to reduce costs and scale back its investment banking operation.

“We have every reason to remain confident about our future,” said UBS.

UBS is expected to present its new strategy for the unit to investors in New York on Nov. 17. The bank said that part of its plan to reduce costs, was to eliminate 3,500 jobs.

“We are finalizing the plans essential to implementing the Investment Bank’s client-centric strategy, which will strengthen our wealth management offering, reduce the firm’s risks and improve returns to shareholders,” said Sergio P. Ermotti, the interim chief executive of UBS, in a statement.

In its earnings statement UBS also sought to reassure investors that it had begun to ensure internal checks in order to avoid a repeat of the rogue trader scandal.

"We have taken and are taking measures to address these control deficiencies," assured the bank, adding that investigations into the case were still ongoing.


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