IE 11 is not supported. For an optimal experience visit our site on another browser.

UBS posts quarterly loss, shifts strategy

UBS AG, one of the hardest hit banks in the subprime mortgage crisis, said Tuesday that it lost 358 Swiss francs ($331 million) in the second quarter as it took another $5.1 billion hit.
/ Source: The Associated Press

UBS AG, one of the hardest hit banks in the subprime mortgage crisis, said Tuesday that it lost 358 Swiss francs ($331 million) in the second quarter as it took another $5.1 billion hit in writedowns on bad assets.

The net loss for Switzerland’s largest bank in the April-June period compared with a profit of 5.5 billion francs a year earlier, while the writeoffs on dwindled holdings brought the total for the past year to $42.5 billion.

The bank proposed four new board members to as part of its plan to strengthen oversight of management and warned that the early feeling that the worst of the subprime crisis was over turned out to be illusory.

“The positive sentiment seen at the end of first quarter 2008 that the credit crisis may be easing was short-lived as trading conditions deteriorated significantly in the second half of May, in particular for assets related to U.S. residential real estate as well as other structured credit positions,” a bank statement said.

The new results come on top of writedowns totaling $37.4 billion over the previous nine months.

Chief Executive Marcel Rohner told reporters that UBS had been losing market share as a result of its performance in the market turbulence.

The bank said it had net new money outflows during the quarter of 43.8 billion francs ($40.5 billion), compared with inflows of 34 billion francs in the second quarter 2007, indicating some customers were pulling out funds and looking elsewhere.

“This occurred in the context of continuing credit market turbulence and its impact on the firm’s operating performance and reputation,” the statement said.

It said that at the end of the quarter total invested assets stood at 2.8 trillion francs billion ($2.6 trillion), 15 percent down from the 3.3 trillion francs invested in the same quarter a year earlier.

The bank said its staff declined by 2,387 people to a total of 81,452 during the quarter, with most of the reduction in the investment bank, blamed for most of the bad investments in U.S. subprime securities.

UBS said it was making changes in its strategic direction and launching “a comprehensive program to re-engineer its business,” making its divisions autonomous and more agile in managing trends in the financial industry.

This, it said, would enable it better to navigate “the uncertain near-term outlook for global financial markets and potential changes in regulatory capital requirements.”

“Our review has clearly revealed the weaknesses associated with the integrated ’one firm’ business model,” said Chairman Peter Kurer. “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.”

Rohner said UBS had already reduced risk exposure, costs and personnel of the investment bank.

“I am determined to make the management of UBS more effective,” said Rohner.

The bank announced four new candidates for the board of directors to be selected at a shareholders meeting Oct. 4 — William G. Parrett, retired chief executive officer of Deloitte Touche Tohmatsu; Bruno Gehrig, chairman of Swiss Life Holding and vice chairman of Roche Holding AG; Sally Bott, group human resources director of BP plc; Rainer-Marc Frey, who has held senior positions in a number of investment management companies.

“These candidates bring specific and relevant experience to UBS, namely in global financial services, the fields of change management and regulation and the perspectives of institutional shareholders,” UBS said.

Their selection is part of the new corporate governance framework started July 1 to strengthen the oversight role of the board.

UBS also announced the appointments of Markus Diethelm as group general counsel and John Cryan as group chief financial officer.