GENEVA ? Scandal-hit Swiss bank UBS AG reported Tuesday a 39 percent drop in third-quarter profit, slightly less than feared, due to a rogue trading loss in September that has thrown Switzerland's largest bank further into turmoil.
Profit at the Zurich-based bank fell to 1 billion Swiss francs ($1.13 billion) from 1.66 billion francs during the same three-month period through September 2010.
UBS said the fall was "mainly due" to the loss of 1.8 billion francs from the unauthorized trading incident, lower revenues in the investment bank and 394 million francs in restructuring charges.
It said this was partly offset by the bank's own credit gain of 1.77 billion francs and a gain of 722 million francs from the sale of treasury-related investments.
"Current market conditions and trading activity are unlikely to improve materially, potentially creating headwinds for growth in revenues and net new money," UBS told shareholders in a letter Tuesday. It added that through cost-cutting and scaling back on its investment banking "we have every reason to remain confident about our future."
UBS shares Tuesday were up 2 percent, at 11.38 francs, in Swiss trading.
Analysts said the results were higher than expected, but noted that they included one-off gains of 550 million francs.
"Removing special factors the results are only slightly better than our estimates," Zuercher Kantonalbank analysts said. They noted that the investment bank's fixed income and share trading businesses performed worse than expected.
Pre-tax losses at the investment banking unit rose to 650 million francs, from 406 million francs, because of the trading loss. The wealth management unit took in 7.8 billion francs in net new money during the third quarter, down from 8.2 billion francs in the previous quarter.
Earlier this month, UBS had said it would report a modest net profit for the quarter, despite saying at the time the alleged rogue trading loss was revealed that it might be forced to report an overall loss as a result.
London-based trader Kweku Adoboli was arrested Sept. 15 and has been charged with fraud and false accounting.
The incident threw UBS into turmoil and led to the resignation of the chief executive brought in two years ago to turn around the bank's fortunes after massive subprime losses and a damaging U.S. tax evasion case.
"UBS clients and shareholders can rest assured that our financial, capital and funding positions remain unquestionably solid," interim CEO Sergio Ermotti said Tuesday.
He said he remains confident about the bank as it revamps its services for investment banks and wealth management clients and tries to cut the bank's risks while improving returns for shareholders.
"We are well positioned in areas of future growth, and our targeted investments, together with our focus on efficiency, will strengthen the firm," he said.
UBS chief financial officer Tom Naratil wouldn't comment Tuesday on the possibility of further job cuts. He said the bank would "submit to any review" of its activity related to the unauthorized trading and has taken disciplinary action related to the case.
The bank said it filed a document as required to the U.S. Securities and Exchange Commission identifying weaknesses ? and steps it is taking to addres them ? with its internal controls, such as ensuring that all trades are recorded accurately in its books.
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