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UBS disappoints as second-quarter net profits fall 58 per cent

The Swiss lender loses $356m after investing in Facebook shares.

The Swiss banking and financial services group UBS has posted second-quarter profits of $434m (£276m) – a $356m drop compared with a year earlier. The 58 per cent decline in profits comes as UBS is paring back its investment banking division in order to focus on wealth management.

Much of the hit was due to the firm's investment in Facebook shares in May. The social network raised $104bn when it floated its shares but its price has since plummeted by nearly 40 per cent. Furthermore, market volatility in Europe has continued to affect trading activity across the financial services sector. The outlook for the next few months is less than optimistic; UBS warns that due to the "reduction in market activity levels typically seen in the third quarter", the next results are "unlikely" to be much better. 

As part of its plan to save two billion francs a year by 2013, the Swiss bank has cut more than 700 jobs during the last quarter. It is in the process of laying off some 3,500 jobs. 

Sergio Ermotti, group CEO of UBS, said: 


Our strong capital, liquidity and funding positions, as well as our transparency and consistency in communicating these strengths, clearly speak in favor of UBS and reassure our clients in an otherwise adverse environment. Clients recognise this and continue to entrust us with their assets.

We reached a key milestone in our strategic execution and we are determined to extend our advantage as the best capitalized bank in our peer group under current and future regulatory requirements. We expect our Basel III tier 1 ratio to be comfortably above 9 per cent by the end of 2012.

Continued vigilance on costs is keeping us firmly on track to deliver our entire planned cost savings by the end of 2013 and we continue to explore avenues to improve efficiency. Looking ahead, we will continue to focus on prudent liquidity management, further reducing risk-weighted assets and delivering the best possible service to our clients. I have the utmost confidence in our ability to deliver on our firm's strategy by adapting our execution in a changing environment.

Meanwhile, UBS is currently subject to investigations related to the possible manipulation of the London interbank offered rate (Libor). According to Ermotti, the bank is in the process of conducting an internal review.