UBS is set to report it has stayed in the red during second-quarter trading, extending its annus horribilis which has seen it exposed as Europe's worst victim of the credit crunch with £18.5 billion of losses on poor lending decisions.

Investment banking is still the big lossmaker at UBS which has laid off more than 500 workers from its Broadgate headquarters in the City.

In a statement ahead of its second-quarter results which are due out next month, the bank, headed by chief executive Marcel Rohner, said they "are likely to be at or slightly below breakeven".

The statement continued: "Further market deterioration led to writedowns and losses on previously disclosed investment bank risk positions, in particular credit valuation adjustments on monoline insurance exposures.

"Writedowns were mitigated by continued exposure reductions and hedge benefits.

"Group net new revenue was negative for the period. This was most pronounced in April but improved in May and June in particular for global wealth management and business banking.

"The results reflect positive contributions from global wealth management and business banking and from global asset management offset by a loss in the investment bank."

The Swiss bank, which ditched its chairman Marcel Ospel as it was forced into a £7.6 billion rights issue, said that with a Tier 1 capital ratio of 11.5 per cent - indicating current financial strength - it would not need to raise any new equity.

UBS's performance has prompted stakebuilding in the bank and barbed comments from its former leading executive Luqman Arnold who left it to run Abbey and has latterly been involved in an abortive takover plan for Northern Rock. Arnold says UBS needs to be broken up.