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UBS returns to profit

Zurich - Troubled Swiss bank UBS said on Tuesday that it had jumped back into quarterly profit for the first time in more than a year even though it was still grappling with a serious loss of client confidence.

The bank, which was severely hit by the financial crisis and international pressure on tax evasion and Swiss banking secrecy, posted a 1.20bn franc profit in the fourth quarter of 2009.,/p>

It was the first time that Switzerland's banking flagship had posted a profit since the third quarter of 2008 and helped the bank cut its annual net loss to 2.73bn francs from 21.29bn francs in 2008.

The earnings figures beat analyst expectations but investors were unimpressed, with UBS shares down 1.69% in morning trades in Zurich.

The bank is still in the middle of a bruising tussle over tax dodgers in the United States that has prompted unsettled investors to withdraw their funds.

On Tuesday it reported that net money outflows from its international wealth management unit more than doubled from the previous quarter.

Net new money outflows totalled 56.2bn Swiss francs in the fourth quarter, despite an increase in assets from Asia. The outflows from its global wealth management unit rose to 27.3bn francs from 12.9bn.

Profitability to increae clients

The bank said outflows would continue "in the immediate future."

Even Swiss customers continued to desert UBS as total net new money outflows from domestic banking reached 5.9bn francs in the last quarter, compared with 3.9bn beforehand, despite more corporate and institutional business.

UBS said, however, that it managed to hold on to 14.3bn of the 22.8bn francs in invested client funds affected by an Italian tax amnesty, and also underlined a sharp boost for profits in all wealth management units.

In a letter to shareholders, UBS's fresh management team called the ongoing outflows "disappointing," despite the improved profitability.

"We entered 2009 at the height of the crisis. By the end of 2009 UBS has returned to profitability, delivering on its priorities," chief executive Oswald Gruebel said.

"We expect that our return to profitability will increase clients' confidence in UBS and restore our reputation," he added.

UBS said that addressing the causes of net new money outflows "remains a main priority."

Beats expectations

Switzerland's justice minister Eveline Widmer-Schlumpf warned in a newspaper last month that UBS could be under threat if sensitive talks with the United States over a deal settling high-profile tax fraud investigation fall through.

The bank, which was one of the hardest hit in the global financial crisis and has struggled to recover compared to some of its US and British rivals, also bolstered its capital reserves through 2009.

Its Tier 1 capital ratio, a measure of the solidity of reserves which were sorely tested in the crisis, reached 15.4% by the end of 2009, compared with 11.0% a year earlier.

UBS said it expected to see an improvement in its crisis-hit investment bank performance in 2010.

"The investment bank's results always depend heavily on market vitality and client activity levels have been high in January," the statement said.

Tuesday's fourth quarter result outstripped a poll of analysts' expectations by Swiss financial news agency AWP, which had expected a net profit of 374m Swiss francs.

- AFP

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