UBS ups 2008 net loss to $18 billion

By Martin de Sa'Pinto and Lisa Jucca

ZURICH (Reuters) - UBS said earnings would remain at risk due to volatile markets, as it revised up its 2008 net loss to 20.9 billion Swiss francs ($18.06 billion), to include a big U.S. tax fine and more writedowns.

UBS was also more downbeat than a month ago about client flows, saying that net new money remained positive in its wealth management Americas unit, but this was partially offset by net outflows in wealth management elsewhere and in its Swiss bank.

UBS, which is struggling to rebuild its reputation after being hit hard in the credit crisis, said in its annual report that it had revised up its 2008 net loss by 1.2 billion francs from the 19.7 billion francs it reported last month, already the biggest loss in Swiss corporate history.

"Even after substantial risk reduction, our balance sheet remains exposed to illiquid and volatile markets and our earnings will therefore remain at risk for some time to come," UBS said in a letter to shareholders in its annual report.

"Our near-term outlook remains extremely cautious," UBS added in its first forward-looking statement with input from new Chief Executive Oswald Gruebel, a former Credit Suisse chairman appointed late last month to turn around the firm.

Analysts said Gruebel was trying to grapple with the bank giant's crisis by getting all the bad news out at once.

"The new CEO is probably trying to do some kitchen sinking," said Andreas Venditti, an analyst at ZKB, meaning Greubel intends to announce all of the bad financial news in one go.

Shares in UBS opened 3.8 percent down after the revised loss and cautious outlook, but then turned positive and were trading 0.5 percent up at 9.84 Swiss francs at 1343 GMT (9:43 a.m. EDT), while the Dow Jones index of European bank stocks was up 2.8 percent.

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UBS had said on February 10, the day it announced its 2008 results, that net new money had turned positive in wealth and asset management in January, giving a ray of hope to investors that it was managing to stem a flood of client withdrawals.

Since then, the world's largest wealth manager agreed to a $780 million fine to avert U.S. criminal charges that Swiss regulators say could have threatened the bank's survival, and said at the time it would book the fine onto its 2008 accounts.

However, it is still fighting a U.S. civil case that is seeking to force it to reveal the names of 52,000 clients suspected of dodging taxes by stowing cash in Swiss accounts, seen as a threat to Swiss banking secrecy and UBS's reputation.

In contrast with its February statement, UBS said on Wednesday its global asset management division had suffered further outflows.

"There seems to be further outflows. The wealth management inflows are skewed toward the U.S., which is not as profitable as other areas of wealth management," said Venditti.

"The big question is: when will the wealth management and Swiss bank division turn positive?"