UBS shares jump as private bank proves its appeal

Wed May 2, 2012 5:17am EDT
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By Katharina Bart

ZURICH (Reuters) - UBS AG UBSN.VX posted healthy results from its flagship private bank on Wednesday, underscoring the Swiss lender's appeal as a haven for the savings of the world's wealthy and backing the company's strategic focus on the business.

Encouraged by the strong private banking figures, UBS shares jumped 6.0 percent to 12.00 francs by 5:21 a.m. EDT, outpacing a 0.8 percent rise in the broader European banking sector and hitting its highest in almost a month.

Switzerland's biggest bank, which is scaling back its risky investment bank which suffered huge losses in the credit crunch to focus on private banking, said the latter unit won a net 6.7 billion Swiss francs ($7.4 billion) in fresh assets in the first quarter and hiked margins.

"Wealth management net new money and gross margins were slightly better than we might have expected post the Credit Suisse results, which arguably gives the (UBS) results a better 'quality' feel than those of peers," said Nomura analyst Jon Peace, who rates UBS stock a "buy."

Last week, Credit Suisse Group AG CSGN.VX reported a slim profit for the quarter amid a better-than-expected showing from its fixed-income division.

Under Chief Executive Sergio Ermotti, UBS is shrinking its balance sheet to help meet Switzerland's tough new capital rules to make the country's banks more robust after the financial crisis. UBS said it is on track to achieve its target of 2 billion francs of cost savings by the end of 2013.

The strong private banking numbers also reflect UBS's recovery from its difficulties with the U.S. tax authorities which whom it reached a settlement in 2009, admitting it helped wealthy Americans dodge taxes.

UBS, also trying to recover from a rogue trading scandal involving London-based Kweku Adoboli, accused of unauthorized deals that cost the bank $2.3 billion, was cautious on the outlook for the second quarter.   Continued...

A Switzerland national flag flies in front of the logo of Swiss bank UBS at the company's headquarters in Zurich April 13, 2012. REUTERS/Arnd Wiegmann