* Q4 net loss 1.89 bln Sfr vs 2.078 bln loss in Reuters poll
* Private bank net new money 2.4 bln Sfr, misses 6.8 bln
* Unit posts 85-basis point gross margin, missing 95-105
* Bonus pool cut; bankers to be paid in loss-absorbing
* Cap on individual bonuses halved to one mln francs
* Bank shed 1,100 staff in Q4; another 1,900 set to go by Q3
By Katharina Bart
ZURICH, Feb 5 Swiss bank UBS reported
faster than expected progress in overhauling its investment bank
but its flagship wealth management unit performed
disappointingly, weighed down in Europe where Switzerland is
under fire for helping tax cheats.
UBS announced a 1.89 billion Swiss franc ($2.08 billion) net
loss for the fourth quarter on Tuesday following a big fine for
rigging benchmark interest rates, although this was less than
the 2.078 billion analysts had expected on average.
Switzerland's biggest bank also said it was cutting overall
bonus payments to its staff, with the maximum individual payout
halved to one million francs.
UBS announced plans in October to fire 10,000 staff as it
returns to its private banking roots and ditches much of the
trading business that lost $50 billion in the financial crisis
and prompted the rate rigging fine.
"We are on track with the transformation of the investment
bank," chief executive Sergio Ermotti told a news conference in
UBS shares traded down 0.13 percent at 1625 GMT, lagging a
1.1 percent firmer European banking sector index.
"Investors who buy UBS shares do so for the medium-term
transformation of UBS from a universal bank into a wealth
manager, and the subsequent re-rating/capital return it should
deliver," said Sarasin analyst Rainer Skierka. "UBS is on track
to achieve its goals. This has also been underlined with a 50-
percent increase in its dividend."
The dividend was raised to 0.15 francs from 0.10 for 2011.
UBS had already flagged the hefty loss in the quarter due to
the $1.5 billion fine it agreed in December for rigging Libor
and other benchmark interest rates, as well as charges from its
restructuring plan to shed staff.
UBS will buy back 5 billion francs in senior debt in the
coming weeks, after the scaling back of its investment bank
sharply reduced liquidity and funding needs; it said that could
result in "significant" first-quarter own credit charges.
Despite the upheaval, the investment bank's revenues for
advisory services rose 8 percent and those from capital markets
were up 14 percent, even as it slashed risky assets by 19
percent to meet capital rules.
Regulators tightened the rules in response to the banking
crisis of 2008-09, when the Swiss state had to bail out UBS.
UBS said it had cut risky assets to 258 billion francs in
the quarter from 301 billion the previous quarter, already in
sight of the target of 200 billion francs it set for 2017.
"It is reassuring that there are, thus far, apparently very
low losses on exiting the non-core assets," said Andrew Lim of
The fourth quarter was "favourable" for offloading assets
but will be more difficult to notch up further easy successes as
the focus shifts from selling cash assets to derivatives, USB
financial chief Tom Naratil told Reuters: "We had a great head
start," he said. "But we have a lot of work to do."
PRIVATE BANKING MIXED
Results from UBS's flagship private bank, which caters for
wealthy individual clients, were less buoyant. Investors added
assets in fast-growing markets such as Asia, and the business in
the Americas achieved its strongest performance since the last
quarter of 2007, just before the crisis.
However, withdrawals by clients in western Europe sped up
towards the end of the quarter, UBS said. Overall, a net 2.4
billion francs flowed in, missing forecasts of 6.8 billion.
UBS has warned it could lose 12-30 billion francs from total
European assets of over 300 billion as a result of steps to stop
foreigners using secret Swiss accounts to evade taxes.
Naratil said outflows were spurred in part because clients
grew more aware of the risks of not declaring assets, notably
through media coverage of debate in Germany on possibly taxing
the Swiss accounts of German citizens.
Dirk Becker, analyst at Kepler Capital Markets, noted the
gross margin of the wealth management business fell to 85 basis
points, a level last seen when clients stopped trading in the
depths of the financial crisis in late 2008.
"The stock trades at 1.3 times (book value), a substantial
premium to the sector which is not justified through superior
returns or positive business trends," he said.
UBS's Naratil said the bank was still "comfortable" with its
95- to 105-basis point goal for gross margin in the wealth
management business, though it might take years to reach that
level again barring a credible solution to fiscal problems in
the United States and Europe.
Those issues kept UBS's wealthy clients from trading, with
nearly one third of assets in low-margin cash products instead.
Vontobel analyst Teresa Nielsen said private banking
appeared to be picking up overall. "We believe the impact from
tax matters is getting solved. We understand that wealth
management has seen a good start of the year and expect the
gross margin to have reached its floor," she said.
UBS said it will cap cash paid as a bonus to 1 million
francs from 2 million formerly. Overall, its bonus pool for 2012
was cut by 7 percent to 2.5 billion francs, and the bank
introduced a scheme to pay bankers with loss-absorbing capital
which is revoked if capital targets are not met.
Deutsche Bank is capping bonus payouts for 2012
at 300,000 euros for employees, not including deferred pay,
sources told Reuters on Friday.
Of the total 10,000 jobs slated to go under the bank's
restructuring, UBS shed roughly 1,100 in the fourth quarter. A
further 1,900 employees were given notice and are expected to
leave by the third quarter.
UBS's local rival Credit Suisse, where investment
banking accounts for a larger share of profits, reports
quarterly results on Thursday. Unlike UBS, Credit Suisse is
holding fast to its securities unit, even as it adapts to
capital rules that make it harder to turn a profit from trading.
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.