Tax credit to save UBS from another hefty loss

Battered Swiss bank UBS said yesterday it should be saved from another hefty loss in the second quarter by a large tax credit, giving a much-needed boost to its share price.

UBS, which has written £18.7 billion off its assets as a result of the credit crisis, said it expected to break even or make a small loss in the second quarter, helped by the 3 billion Swiss franc (£1.49 billion) tax credit. "This comes as a surprise as the market expected a further multibillion loss in the region between two billion and seven billion Swiss francs," said Landsbanki Kepler analyst Dirk Becker.

But its investment bank continued to lose money, and further market deterioration led to write downs and losses on previously disclosed risk positions, in particular in its monoline insurance exposures, UBS said in a statement.

The expected second-quarter result compares with a loss of 11.5 billion francs in the first quarter, when UBS also announced fresh write-downs, dumped its chairman and sought more emergency capital. UBS now expects its Tier 1 capital ratio to be about 11.5 per cent at the end of the quarter and reiterated that it has no need to raise new equity.

"The results reflect positive contributions from global wealth management and business banking and from global asset management, offset by a loss in the investment bank," UBS said. Earlier in the week, UBS said it was shaking up its board as it struggles to get back to its feet, but it is still not entirely over its problems. The bank confirmed some of the market's fears, saying it had suffered a net outflow of money in the second quarter.

"This was most pronounced in April but improved in May and last month, in particular for global wealth management and business banking," it said.