UBS outshines Deutsche Bank

By Lisa Jucca and Edward Taylor

ZURICH/FRANKFURT (Reuters) - UBS (UBSN.VX: Quote) flagged a return to client inflows by year-end as strong equities and currency trading gains helped it outdo Deutsche Bank (DBKGn.DE: Quote) and other rivals, which were hit hard by the European sovereign debt crisis.

UBS's (UBS.N: Quote) strong second quarter investment banking results stood out against a weak performance at U.S. banking giants Goldman Sachs (GS.N: Quote) and Citigroup Inc (C.N: Quote), driving shares up 10 percent as investors believed Chief Executive Oswald Gruebel's tough restructuring strategy was producing results.

UBS, which was hit by the credit crisis and a tax probe, was also able to slow a bleeding of client money to its lowest level since it started to lose assets in early 2008, and Gruebel said he was confident he could stop outflows by year end.

"We have fared well through the euro crisis thanks to our good risk management approach," said Gruebel, a former Credit Suisse CEO who was pulled out of retirement in 2009 to lead UBS.

"Our results look reasonably good compared to our peers. I am confident we can stop the client outflows this year"

UBS turned in a net profit of 2 billion Swiss francs ($1.90 billion), its third quarterly profit in a row after a string of big losses in 2008 and 2009. It was well above forecasts for 1.34 billion francs.

"We have seen a turnaround in investment banking that was not expected so early. These are good numbers in terms of outflows, which have stabilized," said Francois Savary, chief investment officer for private banking unit of Reyl. "Gruebel was hired to produce a turnaround at UBS and he is delivering."

Swiss competitor Credit Suisse (CSGN.VX: Quote)(CS.N: Quote) had also beaten forecasts with a second-quarter profit of 1.6 billion, but tax and accounting gains had partly offset a significant quarterly decline in investment banking.