Feb.04 - Switzerland's UBS swings to a larger-than-expected fourth-quarter profit and announces higher dividends and bonuses. As Ciara Sutton reports a smaller investment bank and less risky activities seems to be paying off.
917 million Swiss francs - that's more than a billion U.S. dollars - is the fourth quarter net profit at Switzerland's UBS, in what it calls a "transformational" year. The result is nearly three times analysts expectations and a turnaround from last year's 2 billion dollar loss. It means UBS can pay higher dividends and bonuses and it lead to a share increase of 3 percent. The earnings are also a vindication of sorts for UBS's decision to shrink its investment bank and largely withdraw from riskier activities such as bond trading. Mike Ingram from BGC says it's worked. (SOUNDBITE) (English) BGC'S MIKE INGRAM, SAYING: "I think some of the other banks out there could do well to take note of their aggressive strategy of looking on actuarial return on capital at the divisional level, rather than trying to be all things to all people." The group is maintaining a conservative outlook due to a dip in emerging markets. That's unnerving wealthy clients at the core of its wealth management business. And some investors fear UBS could go back to its old ways. Dominic Elliott is from Reuters Breakingviews. (SOUNDBITE) (English) DOMINIC ELLIOTT, REUTERS BREAKINGVIEWS COLUMNIST, SAYING: "With just the equities and advisory piece of the investment bank, ie not the bond trading, is an investment bank that is quite cyclically geared towards the sort of environment we're in at the moment - interest rates are low, so you can't make much money out of bond trading anyway. But if the cycle turns, if bond trading becomes good again, maybe UBS will be tempted." Increased charges for litigation and regulatory matters could also hurt in 2014. UBS is one of the banks being investigated for allegedly manipulating foreign exchange rates