ZURICH UBS posted the biggest annual corporate loss in Swiss history and said it would cut a further 2,000 investment banking jobs as it looks to rebuild its damaged wealth management brand and overcome the credit crisis.
Client withdrawals at the Swiss bank's core wealth management arm accelerated in the fourth quarter. But UBS said net new money turned positive in both wealth and asset management in January, a first positive indicator after three negative quarters.
The news that UBS was winning back some rich clients and the bank's commitment to return to profit in 2009 helped lift shares as much as 10 percent, although trade was volatile.
"No doubt the trends in the fourth quarter were quite weak," said Andreas Weese, an analyst at UniCredit. "But the positive net new money in January is giving the market some confidence that the worst is behind."
UBS, the world's biggest banker to the rich, was one of the first to be hit by subprime woes, as a disastrous expansion into investment banking forced it to write down $49 billion and shattered its reputation for Swiss solidity.
On Tuesday, it reported a bigger-than-expected 8.1 billion Swiss franc ($7 billion) net loss in the fourth quarter and an annual loss of 19.7 billion francs, the biggest ever by a Swiss company and above predictions for 18.7 billion francs.
The quarterly loss came on the back of a hefty 8.8 billion Swiss franc trading loss, as well as charges it made for selling billions in toxic assets to the Swiss National Bank when it was rescued by the state in October.
Chief Executive Marcle Rohner told journalists that UBS was not paying a dividend on 2008 results but still aims to return to profit in 2009 after seeing some positive signs in January.
"While we leave a bad year behind us... we can nevertheless report substantial progress," Rohner said.
"We had an encouraging start into the new year but the environment will remain difficult and volatile as the real economy has not seen the worst yet."
Trade in UBS stock were up 10.2 percent at 1455 GMT (9:55 a.m. EST), one of the best-performing stocks in the DJ Stoxx European banking index, which was up 0.9 percent.
"UBS indicates a strong start into 2009 and a reversal of the money flows. We remain skeptical as the clean-up of the mess will take several quarters," Dirk Becker, Kepler Capital Markets analyst, said in a note.
Rohner said the fourth quarter had seen the "worst environment ever for investment banking" but said UBS remained committed to the business even as it continues to shed jobs.
UBS aims to shrink its investment bank to 15,000, bringing the bank's total workforce to around 75,000 -- a size Rohner says would be appropriate for UBS -- by mid-2009 from 77,000 now. UBS has already announced 7,500 job cuts in the crisis.
UBS also announced structural changes to refocus the bank on its core wealth management business. It is creating two new business divisions: Wealth Management & Swiss Bank under the leadership of Franco Morra and Juerg Zeltner, and Wealth Management Americas, led by Marten Hoekstra.
The bank suffered net new money outflows of 58.2 billion francs from its prized wealth management unit in the fourth quarter, compared with 49 billion the previous quarter.
It said it saw outflows in all regions, except the United States, where it hired nearly 400 financial advisers in the quarter. Source have told Reuters UBS is aggressively poaching advisers from rivals including Morgan Stanley, Merrill Lynch & Co and Citigroup Inc's Smith Barney.
Outflows also continued from its global asset management business in the fourth quarter, but slowed to 27.6 billion francs from 34.4 billion the previous quarter.
UBS said the pace of client outflows slowed in both wealth and asset management from October through to December and turned slightly positive in January, but would give no figures.
Asked if an unlabelled graph in a presentation indicated wealth management inflows of about 2 to 3 billion Swiss francs in January, Rohner signaled the figure may be slightly higher.
UBS said it was working with U.S. authorities on a U.S. tax probe, but gave no details. It is accused of helping rich Americans hide untaxed money in Swiss accounts and it stopped offshore services to U.S. citizens last year.
UBS said its Tier 1 capital ratio, a key measure of a bank's financial strength, rose to 11.5 percent at the end of 2008 from 10.8 percent at the end of the third quarter.
Separately, the Swiss National Bank said it cut the value of toxic assets eligible for transfer to a special central-bank run fund announced in October to help prop up UBS to $39.1 billion from $60 billion.
($1=1.159 Swiss Franc)
(Additional reporting by Emma Thomasson, Sam Cage, Jason Rhodes, Albert Schmieder; editing by Simon Jessop and David Cowell)