UBS may post small loss for 2Q

ZURICH, Switzerland - UBS AG, Switzerland's largest bank, said Friday it expects its second-quarter results to be "at or slightly below break-even" due to a tax credit that will at least partly offset investment losses. It also said it won't need to ask for more capital when it reports the results next month.

Analysts had been expecting a second-quarter loss of as much as $4.9 billion from the bank that has been hammered by big losses related to the U.S. subprime lending crisis.

Shares in the crisis-hit bank jumped 8.2 percent to 22.74 Swiss francs ($22.17) on the announcement but soon fell back as analysts noted that without the unexpected tax credit of 3 billion Swiss francs ($2.9 billion) that UBS would record a significant loss.

The bank's shares closed down 2.6 percent at 20.48 francs ($20.01) on the Zurich exchange.

Worsening market conditions led to write-downs and losses in its investment business during the second quarter, UBS said.

The write-downs were partially offset by profits in its global wealth and asset management businesses, it said.

Analysts had predicted UBS would have a net loss during the quarter of 1 billion francs to 5 billion francs ($980 million to $4.9 billion) as a result of continued exposure to subprime-related investments.

The bank has been struggling with heavy losses for the past year and was twice forced to seek outside capital injections. It said Friday that this will not be necessary when second-quarter results are formally announced Aug. 12.

Analysts at Zuercher Kantonalbank said the news would be welcomed in the short-term, but noted that UBS still holds sizable risky investments and faces difficulties in connection with a high-profile tax probe in the U.S.

Net new money — an important indicator of future business — was also negative during the quarter, the analysts said.

UBS and other banks around the world have been hurt by rising defaults on mortgage loans made to people in the United States with risky repayment histories. The lenders created securities backed by those loans and sold them to financial institutions and other investors. The value of the securities have fallen as mortgage defaults have risen.

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