UBS AG Chief Executive Officer Oswald Gruebel said he’s upbeat about the prospects for Switzerland’s biggest bank after a return to profit, even as he predicted further withdrawals at the private bank.
“The progress we have made in improving our operating efficiency, reducing risk and reorienting our business will continue to bear fruit in the months to come,” Gruebel said at the annual shareholders’ meeting in Basel today. “We have every reason to be optimistic.”
UBS said two days ago it made a pretax profit of at least 2.5 billion Swiss francs ($2.4 billion) in the first quarter, the most since the second quarter of 2007. Gruebel, who joined UBS in February 2009, is relying on a recovery at the debt trading unit to boost earnings after nine straight quarters of client outflows at the wealth and asset-management divisions.
“UBS has been successful in the first steps to turn the ship around,” Morgan Stanley analysts led by London-based Huw van Steenis, who rate UBS “equal-weight,” said in a note to clients this week. “This should also help sentiment in the private bank.”
UBS rose 21 centimes, or 1.2 per cent, to 18.26 francs by 11:16 am in Zurich trading. The shares are up 14 per cent this year, beating the 4.2 per cent increase in the 52-member Bloomberg Europe Banks and Financial Services Index.
“We know that although our bank has turned the corner, we still have a long and arduous road ahead,” Chairman Kaspar Villiger told shareholders.
‘Difficult’ and ‘unpleasant’
Wealthy clients withdrew about 15 billion francs in the first quarter, down from 45.2 billion francs in the fourth. Asset management had net outflows of about 3 billion francs in the first three months of this year, UBS said this week.
“We will have to accept further outflows before we can turn this trend around,” Gruebel said today.
UBS, which has seen about 391 billion francs of net redemptions since the beginning of 2008, is battling with outflows after departures of client advisers, credit-crisis losses and the US investigation into tax evasion by some American customers.
Settlement of the US lawsuit against UBS that sought information on as many as 52,000 American clients is endangered by a January ruling of the Swiss administrative court, which said the accord to disclose as many as 4,450 accounts wasn’t fully enforceable. To save the deal, the Swiss government is seeking parliamentary approval for the accord.
“I clearly recognise that this is difficult and extremely unpleasant for our political institutions,” Gruebel said. “I also understand the annoyance repeatedly expressed with UBS. We will see to it that UBS never finds itself in such a situation again.”
Management approval
Gruebel, 66, cut 3.4 billion francs of costs last year by eliminating jobs and employee perks, and appointed six new members to the executive board to return UBS to profitability. He has said that boosting earnings may also increase clients’ confidence in UBS and halt withdrawals.
UBS will also ask shareholders today to vote on approving the actions of management and the board of directors, a so- called discharge, in the years 2007 through 2009, when it reported a cumulative 29.3 billion francs in net losses. The bank had postponed the vote during the previous two years while trying to clarify the causes of its losses in the credit crisis, the second-biggest among European banks after Edinburgh-based Royal Bank of Scotland Group.
“The board of directors is evidently hoping that legacy liabilities can be simply brushed under the carpet in parallel to the financial recovery,” shareholder group Actares said in a statement yesterday, adding that it will vote against the discharge. “This is a big mistake.”
Liability
Ethos Foundation, a Swiss shareholder group, recommended last month that investors refuse approval for the actions of UBS’s management and board of directors, “who are responsible for the bank’s enormous losses over the past few years.” UBS decided last year not to file any charges against its former executives and board members, including former Chairman Marcel Ospel, 60, after about 10 internal and external investigations into the bank’s losses over the past two years.
