* Accounting gain also helped U.S. bank results
* Investment bank suffering amid debt crisis
* Interim CEO Ermotti working on investment bank cuts
* Net new money seen holding up despite trading scandal
By Emma Thomasson
ZURICH, Oct 25 Swiss bank UBS
is set to post a big fall in underlying third-quarter profit on
Tuesday due to sluggish trading, though an accounting gain
helped cancel out a $2.3 billion rogue trading loss uncovered
UBS said earlier this month it would post a "modest" third
quarter profit even after the $2.3 billion loss and 400 million
Swiss francs of restructuring costs, helped by a 1.5 billion
franc gain on the value of its own debt.
This accounting gain -- which occurs because the bank could
profit from buying back its own bonds at lower levels -- also
gave a big boost this quarter to profits at most U.S. banks.
However, UBS results are also set to mirror their U.S. peers
in showing declining bond and stock revenues as sovereign debt
worries spiralled in the three months to
Analysts polled by Reuters forecast net profit of just 276
million Swiss francs, down over 80 percent from a year ago and
compared with the 1 billion francs it posted in the second
quarter, already hit by falling trading volumes.
Stripping out the trading loss, accounting gain and other
exceptional items, analysts forecast a clean net profit of 588
"Client inactivity arising from the European debt crisis and
its poor position in investment banking are mainly to blame for
the poor Q3 result," said Helvea analyst Peter Thorne.
Third quarter revenues from fixed income, currencies and
commodities (FICC) fell 49 percent on average from the second
quarter across JPMorgan , Citi , Bank of America
, Goldman Sachs and Morgan Stanley , after
stripping out accounting gains.
In equities trading, revenues fell 24 percent on average at
those five banks, excluding the own credit gains.
With the numbers unlikely to surprise, investors will be
focusing on comments by interim Chief Executive Sergio Ermotti,
appointed after Oswald Gruebel quit over the trading loss.
He is working on a major overhaul of UBS's troubled
investment bank ahead of an investor day on Nov. 17 that is
expected to make radical cuts to focus on serving the core UBS
business of managing the money of wealthy clients.
"We expect to get more clarity regarding the future run
rates at the investment bank and its FICC trading business, how
advanced UBS is with its restructuring and if there could
potentially be further restructuring announcements to come,"
said Vontobel analyst Teresa Nielsen in a note.
UBS already announced in August it would cut 3,500 jobs from
its around 66,000 staff to shave 2 billion Swiss francs off
Investors will also be keen for an update on the bank's
internal investigation into the trading scandal as well as any
progress on choosing a permanent replacement for Gruebel, which
the bank has said could take up to six months.
Chief Financial Officer Tom Naratil said earlier
this month the trading scandal had not resulted in lots of the
bank's rich clients withdrawing their money, predicting wealth
management net new money broadly similar to the second quarter,
when it reported client inflows of 8.2 billion Swiss francs.