UBS predicts battered profits to recover

UBS last year posted its first-ever full-year loss, followed by two successive quarters of losses this year, as it had to write down over $42.5 billion worth of subprime-related assets when the financial market crisis set in.

With the financial turmoil in the United States taking a turn for the worse over the past two weeks, some analysts had expected UBS to post further writedowns when it reports its third quarter results on November 4. But the bank expects a recovery.

"Despite recent extremely volatile market conditions, UBS currently expects to report a small profit for the third quarter, based on preliminary estimates," said a statement summarising Chairman Peter Kurers address to shareholders.

The bank, whose shares have been wildly volatile in recent weeks, would also make profits in 2009, Kurer told shareholders during an extraordinary general meeting.

Kurer underlined the banks commitment to making the bank profitable again.

UBS's chief executive officer "Marcel Rohner and I have said that the Bank will be profitable in the year 2009... Despite the difficult environment and the latest developments we still are fully committed to and optimistic about achieving this objective," he said, according to a copy of his speech.

Analysts at Bank Wegelin said in a note to clients: "The last few days worst fears appear not to have come true. The further reduction in risk positions would be taken positively."

While it noted that there was still question marks surrounding the banks strategy, "all in all, relief should dominate."

Bank Vontobel's analysts saw the bank reaching a turning point, and said it was recommending its clients to buy UBS shares.

"We think that UBS is close to reaching an inflection point and we see the risk/reward more balanced," it said in a note to clients.
UBS had disposed of many of its U.S. commercial and residential mortgage-related positions, said Kurer.

"Risk positions on our balance sheet have been written down, closed out or sold. Headcount and operating costs are in the process of being reduced," he said.

The bank has also embarked on a programme to reposition itself and take remedial measures following the crisis, including the way it apportions risks.

Kurer also cited as a priority the settlement of major legal cases such as the U.S. investigation into whether the bank had helped its U.S. clients to evade taxes.

It would stop offering cross-border services to clients in the United States through entities that were not regulated there, it said.

"We will completely exit this business and have established a project team to implement this in the fastest and most efficient way within the confines of the law," he said.