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UBS reports losses of £31bn as clients flee global meltdown
4 Nov 2008Switzerland's largest bank, UBS, had more than Swfr83 billion (£45 billion) pulled out of its wealth and asset-management businesses in the last quarter as customers reacted to the global financial meltdown.
The European bank worst-hit by the credit crisis reported losses and writedowns of almost $49 billion (£31 billion), largely because of its exposure to the US housing market.
Last month it was bailed out by the Swiss government, which took a near-10% stake in the bank and removed $60 billion of toxic assets from its balance sheet.
That followed a flight of clients that was sparked by them diversifying their holdings, deleveraging, earlier poor performance of some funds and fears over UBS's financial position. It saw net outflows of Swfr45.8 million from wealth management, Swfr34.4 billion from asset management and Swfr3.5 billion from domestic business banking.
The bank said things had improved somewhat in October after the bail-out, but analysts pointed out that wealth management has always been seen as the core and most resilient area of Swiss banking. Analysts said it could be some time before the inflow of funds, particularly into wealth management, returned to traditional levels.
UBS also warned that it could still face a hit of anything up to another Swfr6 billion in the final quarter on changes to the value of its own bonds versus the value of its external assets. It made a modest profit of Swfr296 million in the third quarter, as predicted at the time of the bailout.
The bank would have stayed in the red without a Swfr913 million tax credit and a Swfr2.2 billion gain on its own credit (in effect the reverse of a writedown on toxic debt). It warned that the fourth quarter has started off tough and expects clients to remain wary, with a knock-on effect on its fee-earning ability.
The bank said it is still cutting back costs and that "operating expenses will continue to be trimmed where possible". In the last three months it has slashed 1,887 jobs across the board, with 574 posts disappearing in its investment bank.
