Switzerland's biggest bank UBS reported a shock investment banking loss on sluggish trading, overshadowing the fact it has stopped bleeding client money for the first time since early 2008, a key turnaround goal.
Third-quarter net profit at UBS was 1.664 billion Swiss francs ($1.72 billion), beating a forecast of 1.225 billion francs in a Reuters poll even as low trading activity in its foreign exchange and rates businesses ate up investment bank earnings.
UBS was the second big European bank to report quarterly figures after local rival Credit Suisse disappointed investors last week as slow equities trading also hit its investment banking business.
UBS, which needed a government bailout in the credit crisis and was hit hard by a US tax probe, was able to attract €1.2 billion Swiss francs of new client money to its wealth management operations as Asian and super-rich clients entrusted more of their cash to UBS, though there were no net inflows into asset management.
But chief financial officer John Cryan said he still wanted to see a number of consistent and sustainable quarters of net inflows to put the difficulties of the bank's core wealth management business behind it.
"Just because we've got a net positive quarter doesn't mean that we've resoundingly seen a turnaround," he said.
US tax authorities had said they would withdraw a remaining summons seeking more client names on November 15th after the Swiss bank agreed last year to hand over details of thousands of wealthy American clients it helped evade taxes, UBS said.
Chief 3xecutive Oswald Gruebel said UBS was on track to meet its medium-term goal of delivering an annual pretax profit of around 15 billion francs.
"We are optimistic that an uptick in the fourth quarter will benefit all of our business divisions. We remain confident about our future," he said.
Mr Gruebel and chairman Kaspar Villiger were dragged out of retirement to turn around the bank, which has set up a panel to define the profile of possible successors, though the disappointing investment bank result and modest client inflows suggest
Mr Gruebel will have to stay for some time to come.
The Swiss bank's capital position remained strong as it reported a Tier 1 ratio of 16.7 per cent, against 16.4 per cent at the end of the second quarter.
UBS said at the end of last month it would need to keep dividends on hold for some time to meet new capital requirements without rising capital and avoid the need to raise fresh funds.
Reuters