UBS Reports SF1.98 Billion First-Quarter Loss on Writedowns

UBS Reports SF1.98 Billion First-Quarter Loss on Writedowns


May 5 (Bloomberg) -- UBS AG, Switzerland’s largest bank by assets, reported a first-quarter loss after writing down the value of hard-to-trade holdings.

The net loss totaled 1.98 billion Swiss francs ($1.75 billion), compared with a restated 11.6 billion-franc deficit in the year-earlier period, the Zurich-based company said in a statement today. The bank estimated its loss at almost 2 billion francs on April 15.

Chief Executive Officer Oswald Gruebel has announced 7,500 job cuts, replaced two executive board members and sold UBS’s Brazilian business since he was hired in February. He told shareholders at the annual meeting that restoring profitability is UBS’s “most urgent” task as it tries to regain the confidence of clients and investors.

“It’s not only a question of bringing the company back into the black, it’s a question of credibility,” said Raoul Paglia, a fund manager at BSI SA in Lugano, who helps oversee about $62 billion, including UBS shares. “They have an image problem. They have to try to restore it.”

UBS rose 5.9 percent this year in Swiss trading, valuing the bank at 46.2 billion francs. Credit Suisse Group AG, also based in Zurich, gained 57 percent, surpassing UBS as the largest Swiss bank by market value.

Credit Suisse

Credit Suisse reported a first-quarter profit of 2 billion francs, beating analysts’ estimates on record trading revenue. Brady Dougan, 49, who succeeded Gruebel as Credit Suisse CEO in 2007, said the bank is “exceptionally well” positioned, although markets remain “challenging” for the entire industry.

The latest round of job cuts at UBS, the fifth since the credit crisis began and the largest since the 1998 merger that created the bank, will help save as much as 4 billion francs by the end of next year. Gruebel, 65, is reviewing UBS operations and may exit some “high-risk” businesses and locations.

“These are important steps that had to be taken, and it’s clear that these measures couldn’t have been taken by the old management,” said Marco Bider, a fund manager who helps oversee about $7 billion, including UBS shares, at Banque CIC in Basel. “Gruebel doesn’t owe anyone anything at the bank.”

Gruebel replaced Marcel Rohner, 44, who left the bank after holding the CEO post for 19 months. UBS shareholders elected former Finance Minister Kaspar Villiger, 68, as chairman of UBS’s board of directors last month. He replaced Peter Kurer, 59, who left after a year in the job amid a probe into whether UBS helped wealthy Americans evade taxes.

Brand Ranking

UBS reached a settlement in February with U.S. authorities that required the bank to hand over the names of about 300 American clients. Customers withdrew 23 billion francs from the main wealth management and Swiss bank unit in the first quarter, the company said on April 15. Clients at wealth management Americas added about 16 billion francs in the period after the bank hired 400 new brokers in the fourth quarter. The units saw a net outflow of 123 billion francs in 2008.

UBS dropped off the list of the 100 most valuable brand names in the latest annual ranking released by Geneva-based Millward Brown Optimor last week. The brand was ranked 64th last year and 51st in 2007.

Before this year, the company had amassed more than $50 billion in losses and writedowns, the most of any European bank in the credit crisis, and had to raise more than $32 billion in fresh capital from investors including the Swiss government.

Gruebel last month hired Ulrich Koerner, 46, as chief operating officer, tapping a former colleague who helped him turn around Credit Suisse six years ago and replacing Walter Stuerzinger, 53, UBS’s chief risk officer between 2001 and October 2007.

UBS named Alexander Wilmot-Sitwell, 48, and Carsten Kengeter, 42, co-heads of the investment bank last week, replacing 52-year-old Jerker Johansson after a year on the job.

The bank also agreed to sell UBS Pactual in Brazil to an investment company run by the division’s former head, Andre Esteves, to reduce risk and free up capital less than three years after UBS bought the business.

BLOOMBERG