* UBS misses Q1 net profit view amid 1.16 bln Sfr charge on
* UBS investment bank slides to quarterly pretax loss
* Bank says has put aside funds for year-end dividend
* UBS confirms 2 bln Swiss franc cost-cutting target
By Katharina Bart
ZURICH, May 2 Swiss bank UBS's
headline first-quarter profit more than halved due to accounting
charges relating to the value of the bank's own debt that tipped
its investment bank into a loss.
UBS had to take a charge of 1.16 billion Swiss francs ($1.28
billion) on its debt, which contributed to a pretax loss of 373
million Swiss francs at its investment bank arm.
Banks have to record gains if the value of their own debt
falls, since it becomes theoretically cheaper to repurchase it.
Conversely they have to book losses if the value of the debt
Switzerland's biggest bank, trying to recover from a series
of setbacks, including a rogue trading scandal, was cautious on
the outlook for the second quarter. It said economic worries
rattling wealthy clients such as the eurozone debt crisis and
the U.S. deficit were likely to take a toll.
"Failure to make progress on these key issues would make
further improvements in prevailing market conditions unlikely
and would have the potential to continue the headwinds for
revenue growth, net interest margins and net new money," UBS
said in a statement.
But the bank was confident its flagship private banking arm
would still attract fresh inflows, an important indicator for
UBS's first-quarter net profit fell to 827 million Swiss
francs from 1.807 billion a year earlier. Analysts had called
for net profit of 1.11 billion Swiss francs in a Reuters poll.
The private bank attracted 6.7 billion francs in new money.
UBS, which is scaling back its investment bank to focus on
private banking, said it is on track to achieve its target of
CHF 2 billion of cost savings by the end of 2013.
Bank Sarasin analyst Rainer Skierka said the results were a
mixed bag of solid wealth management results, with the
securities unit marred by the debt and other charges.
"Wealth management net new money and gross margins were
slightly better than we might have expected post the Credit
Suisse results, which arguably gives the results a better
'quality' feel than those of peers," Nomura analyst Jon Peace
said. He rates UBS stock a "Buy."
Last week, Credit Suisse reported a slim profit for the
quarter amid a better-than-expected showing from its fixed
UBS, under Chief Executive Sergio Ermotti, is shrinking its
balance sheet to help meet Switzerland's tough new capital rules
to make the country's banks more robust after the financial
UBS cut risk-weighted assets by roughly 30 billion Swiss
francs in the quarter, after chopping 20 billion francs in the
fourth quarter, putting it ahead of its reduction target for
In November, UBS told investors it would cut risky assets at
its securities unit by 145 billion francs, a response to the new
rules that make it more costly to take on higher risk business.
UBS put aside an undisclosed sum towards a year-end
dividend, financial head Tom Naratil told journalists. The bank
paid its first shareholder dividend since the financial crisis
It also put 579 million more into its bonus pool for staff
than last quarter. U BS is likely to face a grilling from
investors on pay on Thursday, when it holds its annual