* UBS reports Q4 results at 0545 GMT Tuesday
* Progress on drive to cut risky assets in focus
* Bank has flagged Q4, year net loss due to charges
By Katharina Bart
ZURICH, Feb 5 UBS's progress in
cleaning up its balance sheet will be the focus of attention
when the Swiss bank posts fourth-quarter results on Tuesday,
which it has already warned will show a big loss due to one-off
Switzerland's largest bank by market capitalisation is, like
most rivals, seeking to reduce its risky assets, such as loans
which might not get repaid, in a bid to meet tougher regulations
aimed at preventing a repeat of the 2008 financial crisis.
It has set a target of reducing so-called risk-weighted
assets (RWAs) to 200 billion Swiss francs ($222 billion) by
2017, compared with 301 billion at the end of the third quarter.
Some analysts believe UBS's current rate of progress
suggests it could meet that target earlier, raising the prospect
of a step up in dividends sooner than the current guidance of
"Extrapolating the fourth-quarter disposal rate into 2013
implies UBS could reach its 200 billion Swiss franc RWA target
by 2013," said Liberum Capital banking analyst Cormac Leech. He
rates UBS shares a "buy," with an 18 franc target price.
UBS is offloading RWAs, key to determining the amount of
capital a bank needs to hold, in several ways, including
shutting down trading desks and closing out or selling
UBS's fourth-quarter results will be dented by a $1.5
billion fine for rigging Libor and other benchmark interest
rates, as well as restructuring charges linked to a plan to cut
10,000 staff and dramatically shrink its fixed-income unit to
focus on private banking.
Charges to account for how UBS's own debt is valued will
also weigh on the results.
Because those big financial hits were disclosed late last
year, investors' focus is likely to be on UBS's progress in
cleaning up its balance sheet as well as its performance in
January, which could give an indication of whether its new
strategy is bearing fruit.
Last Thursday, Deutsche Bank struck an upbeat
tone for January business.
UBS's hometown rival Credit Suisse, where
investment banking makes a larger share of profits, is pursuing
a very different strategy. Credit Suisse is holding fast to its
securities unit, even as it adapts to tough capital rules that
make it harder to turn a profit from trading.
Credit Suisse reports quarterly results on Thursday.
So far, investors have shown a preference for Credit
Suisse's stance, sending its stock 23 percent higher since
November, when UBS unveiled its strategy. UBS's shares,
meantime, have gained 15 percent, only just outpacing a 13.5
percent rise in the Stoxx 600 European bank index.
Analysts in a Reuters poll expect UBS to swing to a
fourth-quarter net loss of 2.078 billion francs, from a 319
million franc profit last year.
Fresh client money at UBS's flagship private bank is
expected at 6.84 billion francs. [ID: nL5N0B0GJO]
In October, UBS said it was putting away funds for a 2012
shareholder payout following its first post-crisis dividend for
2011, a modest 0.10 francs a share. The bank aims to pay out
more than 50 percent of profits to shareholders from 2015.
($1 = 0.9029 Swiss francs)
(Reporting by Katharina Bart; Editing by Mark Potter)