Misery at UBS as profits fall by 76%

The fourth quarter of 2011 was clearly tough for the investment bank: profits fell to just 393m Swiss francs.

by Emma Haslett
Last Updated: 31 Jul 2012
Is this proof that when you remove a man’s right to wear jazzy socks, you remove his motivation to make money? UBS, the Swiss investment bank, has announced that its profits in the last three months of 2011 dropped by a staggering 76%, to just 393m Swiss francs (£270m) – from 1.7bn francs a year ago.

Admittedly, the 44% slump in full-year profits (to 4.2bn francs) was partially driven by $2.3bn losses allegedly made by the unfortunate Kweku Adoboli, whose trial starts in September. But that quarterly profit (which didn’t include the rogue trade) is still a fraction of the 1.5bn it usually makes.

To be fair to UBS, it’s had a tough few years since it was bailed out by the Swiss Government during the peak of the financial crisis. In 2007-09, it reported a total loss of 39bn francs. Since then, its investment banking operation has been particularly troubled, with sharp losses in its equities and fixed income and currencies and commodities arms. This quarter was no different, with a loss of 256m francs. So it’s no surprise the Swiss government has ordered it to reduce the size of its investment bank (which is based in London) and increase its capital ratio.

It wasn’t all doom and gloom: its wealth management operation (helping the super-rich decide how to spend their money) posted pre-tax profits of 471m francs, while its chain of retail banks made profits of 412m francs. And despite those well-publicised problems with the rogue trader, that didn’t seem to put wealthy investors off: rich clients invested 3.1bn the bank.

So it’s not all bad, although the company has warned of ‘strategic changes in the firm’s organisation design and structures’ – which may be mealy-mouthed but doesn’t bode well. No surprise, then, that shares fell by 1.8% this morning.

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