UBS CEO: buyback of toxic asset fund to boost capital

UBS is set to buy back the once-toxic assets it transferred to the Swiss National Bank at the height of the financial crisis.

The repurchase of the so-called stabilization fund, would help boost the bank's capital ratio, UBS's CEO Sergio Ermotti told CNBC on Tuesday.

"Positive developments in the last few months allow us to take this important decision for us which will allow our capital base, once the option is exercised, to improve our capital tier 1 ratio by 70 to 90 basis points. We are pleased with the outcome."

UBS shares rallied on the news, and closed around 2.3 percent higher on Tuesday.

The Swiss National Bank has been selling down the $38.7 billion in toxic assets it took over as part of its 2008 bailout of UBS. UBS will pay back a loan and buy back equity in the fund later this year.

Meanwhile, UBS reported a net profit of 690 million Swiss francs ($740 million) for the second quarter.

Ermotti said the earnings were in line with expectations: "When we look at our clients' behavior in the quarter it was pretty much in line with what we've seen in the last few quarters, there's a lot of volatility still and clients are still very cautious across the board," he told CNBC Europe's "Squawk Box."

"Overall, I would say it was not as good as the first quarter but still a strong quarter, a quarter in which our wealth management business achieved its best results in the last four years."

-- Reuters contributed to this report.