UBS Profit Falls 76%, Investment Bank Staggers
Swiss bank UBS (NYSE:UBS) forecast further weaknesses in its troubled investment bank on Tuesday after an attempted overhaul failed to prevent the unit’s earnings from being hit by the eurozone debt crisis and other economic worries.
The investment banking arm lost 256 million Swiss francs during the fourth quarter, compared with a year-earlier profit of 100 million francs, reflecting lower revenues across all business areas amid more challenging market conditions.
The group saw sales growth slow during the period, generating revenue of just 280 million francs from 910 million a year ago. A 4% decrease to 1.99 billion francs in operating expenses could not make up for the decline.
“Traditional improvements in first quarter activity levels and trading volumes may fail to materialize fully, which would weigh on overall results for the coming quarter, most notably in the Investment Bank,” UBS said in a statement.
UBS attributed ongoing concerns in Europe, federal budget issues in the U.S. and continued economic uncertainty throughout the year as reasons for its negative outlook on client activity in 2012.
“Such circumstances would make sustained and material improvements in prevailing market conditions unlikely and would have the potential to generate headwinds for revenue growth, net interest margins and net new money,” UBS said.
While combined revenues from credit, macro and emerging markets climbed 27% to 1.26 billion francs, the gains in the investment bank were offset by weaker performance in other FICC and credit markets.
Total profit for UBS was 393 million francs, down 76% from 1.02 billion a year ago, as a 1,101-person workforce reduction failed to offset weak sales and poor performance in the investment bank.
Analysts in a Thomson Reuters poll were looking for a stronger profit of 737 million francs.
Despite the wide miss, high-net worth clients helped drive slight improvements in its international wealth management group, a reflection of recovery in global equity markets during the quarter and the depreciation of the franc against the dollar.