UBS sees moderate hit from European tax deals

ZURICH (Reuters) - Top Swiss bank UBS said it could lose about 10 percent of its European client assets due to tax deals between Switzerland and other countries, as it confirmed ambitious medium-term goals.

According to slides for a presentation at an investor day in London, UBS said clients from Britain, Germany, France, Italy and Austria had withdrawn 20 billion Swiss francs ($20.82 billion) from offshore accounts in the last 12 months.

“We believe that 15-40 billion are still at risk as a result of changes in tax regulations,” said Juerg Zeltner, head of UBS wealth management, adding UBS had 320 billion francs of invested client assets in Europe as at the end of September.

After sustained global pressure on its cherished bank secrecy, Switzerland is seeking new tax deals with European neighbours to clear up the problem of billions of untaxed client assets held in secret Swiss bank accounts.

“Finally, you are going to lose that money,” said Zuercher Kantonalbank analyst Andreas Venditti, adding that at least some of the 15 to 40 billion francs would be paid out in taxes.

“Compared to the assets they have, it’s a very small proportion,” he said. “It’s very manageable.”

UBS remained on track to reach an annual pretax profit of 15 billion francs by 2014 at the latest, the bank also said.

Shares in UBS were down 0.2 percent at 10:14 a.m., outperforming a 1.4 percent fall in the Stoxx European 600 bank’s index and a 0.7 percent dip in the stock of domestic rival Credit Suisse.


Switzerland last month agreed with Germany and Britain to resolve the issue of untaxed money and to introduce a withholding tax on future deposits. It is expected to seal similar deals with other European nations.

The tax rate and retroactive penalty on offshore accounts still have to be agreed but could be 20-30 percent, meaning banks would have to transfer billions of clients money to foreign tax authorities, while trying to persuade them to keep their accounts.

“We can cope with the European situation because we are very well positioned in Asia-Pacific, emerging markets and the ultra high net worth segment, which are growth areas,” said spokesman Christoph Meier at UBS, the No.1 wealth management player in these markets.

“Markets or currency movements can have a bigger effect on invested assets,” he added.

UBS said last month that inflows from Asian and super-rich clients helped it stop bleeding client money for the first time since early 2008, a key turnaround goal, although it reported a surprise investment banking loss on sluggish trading.

Julius Baer, Switzerland’s biggest listed pure play wealth manager, said last week that growth in emerging markets would more than compensate for any hits to its client assets resulting from new European tax deals.

The larger Swiss banks have invested heavily to capture booming wealth in Asia and other growth markets as well as building up onshore as a clampdown on tax havens has put the brakes on their traditional European offshore markets.

UBS has launched a high-profile advertising campaign and is sprucing up its Swiss branches to try and restore its image and lure back clients who pulled nearly 400 billion francs from the bank after it wrote down more than $50 billion in the credit crisis and was the target of a damaging U.S. tax probe.

After a sharp fall during the financial crisis, shares in UBS have gained around 5 percent so far this year, outperforming a 19 percent fall in Credit Suisse and a 6 percent dip in the Stoxx European 600 banks index.

However, shareholders will have to wait for UBS to start returning profits. The bank said in September it would not pay dividends for some time to preserve capital to meet tougher new rules and avoid the need to raise fresh funds.

Additional reporting by Emma Thomasson, Editing by David Cowell and Erica Billingham