UBS Expects Profit in Q3 Despite Rogue Trading Scandal

UBS AG (NYSE: UBS), Switzerland’s largest bank today said that it expects to post a modest profit in the third quarter despite taking a hit due to unauthorized trading from one of its employees.

Shares of UBS have risen sharply following the announcement despite a sell-off in the broad market. At last check, UBS shares were up 1.89% to $10.76.

Last month, UBS disclosed that it suffered a $2.3 billion loss due to unauthorized trading from a London-based trader, Kweku Adoboli. The trader was arrested on September 15 and is facing fraud and false accounting charges. The bank had last month said that it may post a loss in the third quarter due to the rogue trading scandal. The scandal also led to the resignation of Oswald Gruebel, the bank’s CEO.

UBS, today, said that it expects credit gains and bond sales to help it in posting modest profit in the third quarter. The bank expects positive net new money in its wealth management businesses to be similar to the second quarter. Apart from the trading loss, the bank also took a charge of $435 million during the third quarter due to cost-cutting. The bank said that its cost reduction program is on track.

In a statement released today, the Zurich-based bank said that the majority of affected employees due to the cost-cutting program have been notified and reductions will continue into 2012. The bank also said that it will continue to invest in growth regions, which include Asia Pacific, the Americas, and the emerging markets. The bank also reiterated that its capital position is strong.

Meanwhile, the bank continues to remain under pressure following the disclosure of the rogue trading scandal last month. Even before the scandal was disclosed, the bank was facing pressure to do away with its investment banking unit and focus on the core wealth management business. Sergio Ermotti, who has been appointed as interim CEO following Gruebel’s departure, said in a staff memo recently that the $2.3 billion scandal is a severe setback to the bank’s efforts to regain clients’ trust.

Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.