After losing billions of dollars in the US subprime crisis, Switzerland’s UBS on Thursday announced that it would return to profit in the third quarter of 2008.
UBS Chairman Peter Kurer told anxious shareholders at an emergency general meeting that the bank is projecting “a small profit” for the July-September quarter. In a sign of how much bad news the shareholders have digested this year, it was welcomed as good news.
Even more welcome was UBS’ statement that 2009 “will be an overall profitable year”. The Swiss bank had posted its first-ever full-year loss in 2007, followed by losses in the first two quarters of 2008, writing down more than $42.5 billion worth of subprime-related assets.
Only Citigroup and MorganStanley have written off more assets to the meltdown of the housing market in the US. But despite losing more than any other European bank, UBS says it has escaped the turmoil of the last few weeks. As it has so much invested in toxic assets in the U.S., it will be watching the results of US Treasury Secretary Henry Paulson’s bailout plan closely, hoping for some of the $700 billion to trickle down to its coffers. But today it was at pains to say no matter what the outcome in the US, UBS could weather the storm.
But despite the positive headlines, concrete figures were hard to come by. Shareholder Rudolf Weber took to the floor to say “I would like to know exactly how much this small profit is. Is it 10 francs, 10,000 francs, or a hundred million francs?” No doubt Mr Weber was hoping that chairman Kurer would jump up and say “even more!” but Kurer remained evasive, saying the quarter had only just finished, and results would be made public in November.
Deep in the text of Kurer’s speech he also admitted “a further reduction of the balance sheet” would be necessary. He didn’t give any numbers to flesh that out, although before the meeting analysts had speculated another 5 billion dollars would be written down. Perhaps he was keen to avoid speaking directly about losses – and didn’t bring up the topic of job cuts either. Speculation in business media led to talk of 1,900 jobs being cut – but the only reference Kurer made to this was to say “Headcount and operating costs are being reduced.”
Making the most of the chance to speak directly to the board, shareholders spoke passionately about the need to rebuild trust in UBS, one leaving the floor close to tears.
The first test of that trust will come on Nov. 4, when shareholders find out just how much this “small profit” is.