UBS Swings to Loss on Charges

(Updated with premarket quote.)

ZURICH (TheStreet) -- UBS (UBS) said it swung to a loss in the third quarter, hit by three substantial charges and client withdrawals from its private bank.

The Swiss banking giant swung to net loss of 564 million Swiss francs ($552.9 million), compared with a net profit of 283 million francs a year earlier and a loss of 1.4 billion francs in the second quarter.

During the quarter, UBS incurred a credit charge of 1.436 billion francs due mostly to the tightening of its credit spreads. UBS also recorded a net loss of 409 million francs on the UBS Pactual sale, and another 305 million francs on the conversion of convertible notes issued to the Swiss government.

UBS continued to see clients pull money during the quarter. Net new money outflows totaled 36.7 billion francs, although that number was down from 39.5 billion francs in the second quarter and 83.6 billion francs in the year-ago period. The bank said it does not expect an immediate recovery in client net new money flows.

UBS is cautiously optimistic about a recovery, saying it expects the investment bank's performance to continue to improve into 2010, with fourth quarter results likely to reflect the early stage of its recovery.

"Having stabilized the bank's financial condition and resized the business, I expect to see further progress in future quarters, particularly in 2010," said CEO Oswald J. Grübel in the release. "However, this progress will depend on market and other factors."

However, UBS said the impact of low interest rates on net interest income continues to hold back revenues, especially in its Wealth Management & Swiss Bank unit. Additionally, based on current conditions, UBS expects another credit charge in the fourth quarter, as a result of further tightening of its credit spreads.

UBS shares in the U.S. were set to open lower by 6.1%.

-- Written by Robert Holmes in New York.

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