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November 4, 2009

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Accounting charges put UBS in red

SWISS bank UBS AG yesterday reported a third-quarter net loss of 564 million Swiss francs (US$542 million), blaming accounting charges of 2.15 billion francs for keeping it in the red.

The Zurich-based bank posted a net profit of 283 million francs during the same period last year.

Discounting one-time charges, UBS would have made a third-quarter pretax profit of 1.56 billion francs, it said. The bank said operating income rose 4 percent to 5.77 billion francs compared with the same period last year.

Analysts had predicted a third consecutive quarterly loss this year but differed widely in how to assess the expected writedowns, most of which resulted from tightening credit spreads.

UBS also took a hit from currency exchange in the sale of its Brazilian unit UBS Pactual, and from the conversion of mandatory convertible notes issued to the Swiss government as part of a bailout last year when the bank suffered a record 21 billion franc annual loss.

"Business is steadily returning to normal," said CEO Oswald Gruebel, who joined the bank in March.

"Management actions are delivering visible results, and we are continuing to emphasize risk reduction and capital strength."

UBS said it had further reduced its risky investments, while staff numbers were cut by almost 2,800 and now stood at just over 69,000.

Gruebel said clients were regaining confidence in the bank now that it had settled a long-running dispute with United States authorities over allegations it helped thousands of wealthy Americans evade taxes. UBS has agreed to hand over the names of 4,450 American customers the US government suspects of large-scale tax evasion.

Investors are hoping that with UBS out of the limelight on tax evasion, clients will slowly return.

The Swiss government's decision to end its stake in the bank would help rebuild trust, Gruebel said.

Clients withdrew more money than they deposited during the third quarter, a trend UBS said would likely continue during the last three months of the year.

Net client outflows reached 36.6 billion francs, down from 39.4 billion francs in the previous quarter.

UBS shares dropped 4.6 percent to 16.55 francs in morning trading on the Zurich exchange yesterday.


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