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UBS posts 358 million swiss franc loss

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Latest update : 2008-08-12

Swiss banking giant UBS said it had posted a second-quarter net loss of 358 million Swiss francs (221 million euros, 329 million dollars) and announced a further writedown of 5.1 billion dollars on subprime-related positions.

In a statement, UBS also announced plans to split up its business divisions into three autonomous units in the wake of the subprime crisis, with staff incentives to be aligned with each unit's financial results.

"In the second half of this year, UBS does not expect to see any improvement in the adverse economic and financial market trends that affected this quarter's results," it said.

It would therefore continue to cut jobs, costs and risks, added the bank, which is the biggest in Switzerland.

UBS said net new money outflows in its two wealth management businesses reached 17.3 billion francs, while its Swiss business banking unit posted net outflows of 2 billion francs.

Its global asset management business meanwhile saw net outflows of 24.5 billion francs.

The quarterly net loss was nevertheless an improvement from UBS's staggering first-quarter setback of 11.54 billion francs. It had previously written down more than 37 billion dollars on its subprime-related positions.

The move to separate the bank's businesses into autonomous divisions would "make UBS more effective and agile in managing trends in the financial industry", it said in a statement.

UBS chairman Peter Kurer said that following a review of the bank's operations, several weaknesses had been identified from its "one firm" business model.

"Some of these weaknesses -- such as the blurring of the true risk-reward-profile of individual businesses -- are the source of substantial risk, as we have seen in the past few months," he said.

"Others have led to the creation of excessively elaborate processes and unnecessary layers of complexity."

The new structure would "create a spirit of transformation, clear accountability and transparency, and will allow us to optimize funding and capital usage."

Among financial analysts in the run-up to Tuesday, all eyes had been on the bank's key wealth management division -- which has seen customers take their business elsewhere over the past 12 months.

Zuercher Kantonalbank analysts expected the division to be down 23 billion francs in the quarter, following on from the 12.8 billion francs withdrawn in the first three months of the year.

Just a year ago, UBS was practically a byword for safe, reliable and trustworthy investments.

But the past 12 turbulent months have seen its shares lose 66 percent of their value, and its market capitalisation halve to 45.3 billion dollars from nearly 90 billion.

The bank now ranks 25th in the world in terms of market capitalisation, but has the dubious distinction of being in the top three -- behind US peers Citigroup and Merrill Lynch -- in terms of share devaluation.

UBS has attempted to undergo "shock therapy" to turn around its fortunes, hiving off part of its troubled investment banking arm, and cutting around 5,500 jobs.

The most striking symbol of the bank's bid to turn the page was the resignation of veteran chairman Marcel Ospel on April 1, and his replacement by the bank's in-house lawyer Kurer.
 

Date created : 2008-08-12

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