UBS Q3 Profit Plunges 39 Percent After $2.3 Billion Trading Loss

October 25 00:00 2011

New York, October 25 ( – An unauthorized trading loss of $2.3 billion that UBS AG faced last month has led to a drop of 39 percent in its Q3 profit. Its net income fell to 1.02 billion Swiss francs ($1.16 billion) from 1.66 billion francs a year earlier.

Analysts had estimated that it would have earnings of 318 million francs, after UBS said that the trading loss would be cushioned with gains from wider spreads of its own credit and bond sales leading to a modest profit for the quarter.

UBS had announced 3,500 job cuts in August and now it plans to reduce its investment bank activities while allocating more capital to wealth management amid industry changes that Chairman Kaspar Villiger called a “paradigm shift” last month. Economic uncertainty was blamed by him for clients to trade less in the quarter, while equity-market declines cut assets under management.

Kian Abouhossein, a London-based analyst at JPMorgan Chase & Co., said “The environment has deteriorated,” and added that “We are seeing a much lower activity level driven by market uncertainty in fixed income. Banks that are struggling more will review their strategies first.”

UBS reported that the investment bank recorded a pre-tax loss even without the trading incident.