Believe the gripe

3 November 2009 By Jeffrey Goldfarb Follow @jgfarb

When the revered Swiss banker took over at UBS earlier this year, his grim outlook was partly dismissed as mere expectations management. But a weak Q3 bears him out. Even UBS strongholds wealth management and equities suffered. The shares don t reflect Grübel s continued caution.

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UBS reported a Q3 loss of SFr564m. After stripping out SFr2.2bn of accounting charges, the Swiss bank said it had an underlying pretax profit of SFr1.6bn. Net new money outflows were SFr16.7bn for wealth management and its Swiss bank, SFr9.9bn for US wealth management and SFr10bn for global asset management. UBS's Tier 1 capital ratio improved to 15%.

Having stabilized the bank's financial condition and resized the business, I expect to see further progress in future quarters, particularly in 2010, chief executive Oswald Grübel said. However, this progress will depend on market and other factors.

UBS incurred an owncredit charge of SFr1.4bn because of narrower credit spreads. A further loss of SFr409m was recorded because of foreigncurrency effects related to the sale of its Brazilian operation, UBS Pactual. The conversion of mandatory convertible notes issued to the Swiss government resulted in a loss of SFr305m, partly because of the rise in the UBS share price.

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