UBS beats forecasts with £1.3bn profits for first quarter

The Zurich-based bank is still struggling to rebuild customer trust following its massive losses during the financial crisis and an ongoing tax evasion dispute in the United States.

It reported a first-quarter net profit of 2.2 billion Swiss francs (about 1.3bn) against expectations of SFr2bn on a strong performance by its trading division, lower costs and fewer customer withdrawals.

The bank had recorded a net loss of SFr1.98bn in the same quarter last year.

However, the euphoria was dampened somewhat by the fact that part of the gains came from freed-up reserves, noted analysts at Zuercher Kantonalbank.

The bank's chief financial officer, John Cryan, said improved client confidence and staff morale had helped drive profits during the quarter.

And Cryan said: "Now that we're back reporting some profits I think clients can have more confidence in us, and there are definite signs of that being the case.

"That has the positive effect of boosting the morale of the client advisers."

Customers continued to withdraw more money than they deposited in the January to March period, but at a slower rate than during previous quarters. Net outflows amounted to SFr18bn compared with SFr56.2bn in the last three months of 2009.

So-called net new money – a closely watched indicator of future business in the banking industry – was positive in Asia and among ultra-rich clients, Cryan said.

The end of a tax amnesty in Italy also helped stem withdrawals.

UBS hopes net new money flows will return to positive territory in the course of the year, he added.

The investment banking unit recorded a first-quarter pre-tax profit of SFr1.2bn as traders took advantage of favourable market conditions.

Rivals such as Credit Suisse, JP Morgan Chase and Goldman Sachs also recently reported healthy earnings from their trading divisions and some analysts had expected UBS to do even better than it did.