UBS won't stem withdrawals soon

By Lisa Jucca

ZURICH (Reuters) - Swiss bank UBS does not expect to win back assets from rich clients any time soon as it struggles to rebuild its reputation after a bitter U.S. tax row even as its underlying performance improves.

Higher-than-expected accounting charges pushed UBS into its fourth consecutive quarterly loss and disappointing total net withdrawals of 36.6 billion Swiss francs (21.6 billion pounds) at its key wealth and asset management business prompted shares to fall more than 9 percent to its lowest level in nearly three months.

UBS's results contrast with stellar profits seen at European peers Credit Suisse and Deutsche Bank which both took advantage of a rebound in investment banking while UBS was slashing its own operations.

"Operational improvement is continuing, although not yet in UBS's flagship business wealth management, which suffered from the U.S. tax case and various other negative impacts," said Bank Sarasin analyst Rainer Skierka.

"Investors should not expect substantial improvements in UBS's results before 2010."

UBS stock was down 6.5 percent at 16.21 Swiss francs by 1:51 p.m. British time, helping dampen sentiment on European bourses. The DJ Stoxx European banking index fell 3.1 percent.

UBS's net loss of 564 million Swiss francs was narrower than 1.4 billion Swiss francs in the second quarter but larger than average analyst forecasts for 207 million. The bank's 2008 loss was 21.3 billion francs, the highest in Swiss corporate history.

"We do not expect an immediate recovery in client net new money flows," Chief Executive Oswald Gruebel and Chairman Kaspar Villiger said in a letter to shareholders.