UBS posts Q4 earnings drop to 393 million francs

GENEVA (AP) — Switzerland's biggest bank UBS AG reported Tuesday a 76 percent drop in net profits during the fourth quarter of 2011 compared with the same period in 2010, a sign of continued struggles linked to its $2 billion rogue trading scandal and economic weakness in Europe and abroad.

Profits at the Zurich-based bank fell to 393 million Swiss francs ($425 million) in the fourth quarter of 2011, compared to the same quarter in 2010 when net profits totaled 1.29 billion francs. Those quarterly profits were later increased to 1.66 billion francs due to tax gains.

Net profit was below the 658 million francs consensus estimate by analysts, but Zuercher Kantonalbank's analysts welcomed a strong increase in UBS's capital reserves.

Shares in UBS dropped 1.5 percent in Tuesday morning trading after closing at 13.21 francs on the Zurich exchange Monday.

UBS' investment bank reported a second consecutive quarterly pre-tax loss of 256 million francs, compared with a pre-tax profit of 100 million francs in the same quarter of 2010.

The bank reported cost-cutting reductions of 2.1 billion francs along with cuts in its bonus pool of 40 percent compared with a year ago. It said there had been an improvement of more than 50 billion francs in net money flowing to its key wealth management businesses due to net inflows from the Americas, Asia Pacific, emerging markets and "globally from ultra high net worth clients."

UBS Chief Financial Officer Tom Naratil told reporters that the bank has established a "rock solid foundation" of capital, liquidity and funding — its main business goals.

"We have the strongest capital position of our peer group," Naratil said of the industry-wide requirements for banks to increase their capital cushion. And despite it being a "difficult" year for the bank and the industry as a whole, he said, the bank delivered a full-year pre-tax profit of 5.5 billion francs for the year.

He said the bank foresees strong headwinds for growth and gains in early 2012 due to Europe's sovereign debt crisis and issues with the U.S. federal budget deficit, the European banking system and continued uncertainty about the global economic outlook.

It will take a resolution of the debt crisis in Europe "for client confidence to fully return," he added.

British and Swiss financial market authorities have begun enforcement proceedings against UBS over its massive rogue trading loss last year. Such proceedings can result in regulators demanding changes in the way a bank operates and UBS has said that it would fully cooperate with the regulators.

Former UBS trader Kweku Adoboli, 31, was arrested in September on charges of committing fraud that cost the bank over $2 billion. He has pleaded not guilty to two counts of fraud and two counts of false accounting between 2008 and 2011.

Naratil said the bank's safety and soundness should be reassuring to clients and "the trading incident is not something that clients are talking to us about today."

The bank, which has over 60,000 staff around the world and manages more than 2 trillion francs in assets, reported its results before markets opened in Zurich on Tuesday.