UBS Profit Jumps as New Client Money Pours In

UBS, the world's largest wealth manager, said fourth-quarter net profit from continuing operations rose 19% to 3.145 billion Swiss francs ($2.51 billion) from a year earlier as money flooded into its wealth management business and investment banking boomed.

The result was well ahead of analysts' expectations. The 17 analysts polled by Reuters had on average predicted net profit of 2.727 billion francs.

The Swiss-based group reported a full-year net profit record of 12.257 billion francs and net new money for the full year of a record-breaking 151.7 billion francs.

Net profit was 2.199 billion francs in the third quarter of 2006 and 2.597 billion from continuing operations in the final quarter of 2005, when net gains from the sale of private banks and GAM, a hedge fund sold by UBS, boosted total net profit to 6.487 billion.

UBS said net new money inflows into its wealth management business in the fourth quarter were 21.7 billion francs, in line with analysts' forecasts and up from 19.7 billion francs in the fourth quarter of 2005.

UBS said total operating income in the fourth quarter in investment banking was up 22% at 5.602 billion francs with equities business surging 33%.

Dividend Payout

The Swiss bank proposed a dividend payout of 2.20 francs per share, up from 1.60 francs a year earlier and announced a new three-year share buyback programme worth about 16 billion francs at the current share price level.

The results came after UBS faltered in the third quarter, against expectations, when a bet on U.S. interest rates went wrong, hitting bonds and equities trading revenues.

UBS 2005 results had been distorted by one-off gains from the sale of some of the Swiss bank's private banking businesses to Julius Baer.

UBS said its cost-income ratio in the fourth quarter was 70.6% in the financial business, slightly improved from 70.9% in the final quarter of 2005.

Investors are focusing on UBS's growing cost base as it expands with a string of acquisitions, which last year included Brazilian wealth manager Banco Pactual, the brokerage business of Piper Jaffray and McDonald Investments in the United States.

Hopes were high that UBS, Europe's second largest bank with a market capitalisation of $134.83 billion, would deliver strong numbers after Deutsche Bank and U.S. investment banks such as Goldman Sachs reported a surge in 2005 profits.

UBS shares, reflecting its strong wealth management franchise, trade at 14.15 times estimated 2007 earnings, compared with Deutsche Bank, on a multiple of 9.84 and Credit Suisse on 13.02.