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UBS Surprises with Higher-than-Forecast Profit

Swiss banking giant UBS said Monday its pre-tax profit will be at least 2.5 billion Swiss Francs ($2.33 billion) in the first quarter, when outflows of funds continued.

UBS
Sharon Lorimer
UBS

Net outflows for the quarter at the bank's main Wealth Management and Swiss Bank are expected to be around 8 billion francs after clients pulled money out of the bank's private wealth division in the US and from its Global Asset management division.

Total outflows are 18 billion Swiss francs.

UBS's first-quarter pre-tax profit was higher than forecasts, according to a research note by JP Morgan. However, many in the market had been betting on strong numbers after reports last week that UBS fixed income division had a solid quarter, JP Morgan noted.

News on slowing net outflows would be received well investors, the note also said.

UBS's announcement came as a surprise to investors ahead of a highly anticipated Annual General Meeting (AGM) in Basel Switzerland on Wednesday. That meeting will see activist investors led by Ethos attempt to have bonuses set to be paid to CEO Oswald Gruebel and other executives cut.

"While acknowledging that progress has been achieved toward restoring the bank's financial health, Ethos questions the rationale of paying such high variable remuneration," Ethos, which is a Swiss activist investment group, said.

The group believes Swiss pension funds will back its proposal but troubles with tax authorities across the world are major issues facing the bank.

While Monday's news on net outflows at least shows they have slowed, ongoing disputes with tax authorities in the US and Germany have seen clients pull money out of UBS amid fears their account details will end up with the IRS and the German tax authorities.

Wednesday's AGM will also vote on whether former bosses who racked up losses of $50 billion during the credit crisis should be absolved of responsibility.

Ethos and another group called RiskMetrics are calling for former chairman Marcel Ospel and former CEO Peter Wuffli not be let off for their part in the banks losses.

A ruling against Ospel or Wuffli would not have any immediate implications as neither is accused of wrong doing and they do not face any specific allegations.