Profit fears hit UBS
ZURICH (Reuters) - Shares in Swiss bank UBS AG (UBSN.VX) (UBS.N) fell sharply on Monday after its new chief executive was quoted as saying it could take two to three years to bring it back to making a sustainable profit.
Sunday's edition of Swiss newspaper NZZ am Sonntag quoted Oswald Gruebel as saying UBS would have to cut costs further, though he did not give specific details.
"Until now management had repeatedly assured that in 2009 the company should be back in black numbers," Wegelin analysts said in a note. "It seems Mr Gruebel is taking a somewhat more realistic position."
UBS shares fell 8 percent to 10.21 Swiss francs by 0835 GMT (3:35 a.m. EST), against a 6 percent drop in the European banking sector .SX7P.
UBS is struggling to rebuild its once powerful brand after massive investments into risky U.S. assets forced it to make more writedowns than any other European bank and to accept government backing.
When asked by NZZ am Sonntag how long it would be before UBS would be sustainably profitable again, Gruebel said: "If there were only factors which I could personally identify, I would say two to three years.
"But there is the market, which I cannot predict. Apart from that, there is for me of course a limit of about five years. Then no one wants to have an operational boss who is 70 years old or more," Gruebel said.
UBS named Gruebel, who masterminded a turnaround at rival Credit Suisse (CSGN.VX), as chief executive on Thursday, replacing Marcel Rohner as the bank seeks to end a run of crises, including a U.S. tax probe that is threatening Switzerland's prized banking secrecy.
Later on Monday Swiss Justice Minister Eveline Widmer-Schlumpf is due to meet with U.S. Attorney General Eric Holder in Washington.
The Swiss Justice Ministry says the UBS tax row will be on the agenda at Monday's meeting, along with other issues including the fight against financing of terrorism and organized crime.
UBS is raising the base salary of its senior investment bankers after reducing many bonuses sharply, the New York Times said, citing two people briefed on the changes.
Some salaries for senior bankers are being raised to about 300,000 pounds ($429,400) from about 120,000 pounds ($171,800), still less than they earned when they received bonuses, the paper said.
UBS agreed to change its compensation practices when it received a Swiss government bailout last year and is slashing bonuses for its investment bank by more than 80 percent.
UBS declined to comment.
Raising salaries is part of a bigger overhaul of UBS's compensation system, the NY Times said.
UBS confirmed at the weekend that more bonuses had been returned by executives.
(Additional reporting by Ajay Kamalakaran; Editing by Greg Mahlich)
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