UBS, Deutsche Bank results reassure after stress tests

Written by Reuters | Updated: Jul 28 2010, 07:57am hrs
UBS outdid rivals thanks to strong investment banking revenues and shrinking client outflows, while Deutsche Bank held ground after a drop in loan loss provisions.

Driven by strong equities and currency revenues, UBSs improved investment banking performance stood out against weak results at several US rivals in the face of sovereign debt concerns, suggesting chief executive Oswald Gruebels tough restructuring strategy is working.

Clients drained a total of about 5 billion francs at the Swiss banks wealth and asset management divisions, the lowest quarterly withdrawal UBS has experienced since it started to bleed assets at the start of 2008, increasing the chance UBS will stop the asset bleeding by year end.

The results are rather good. The rebuilding of the business is working successfully, said Helvea analyst Peter Thorne as UBS shares were indicated to open up 5 percent. We may start to see inflows at the end of this year, beginning of next.

UBS turned in a net profit of 2 billion Swiss francs ($1.90 billion), its third quarterly profit in a row after a string of losses following the financial crisis and a tax row. It was well above forecasts for 1.34 billion francs. Germanys top lender Deutsche posted second-quarter pretax profit in line with expectations, helped by lower loan loss provisions amid weaker industry trends in investment banking.

Its corporate banking and securities division, run by 47-year old Anshu Jain, posted 779 million euros in pretax profit. These accounted for the lions share of 1.52 billion euros ($1.96 billion) in group pretax earnings.

Deutsche performed less strongly than in the first quarter, but 16 percent stronger than during the year-earlier period, mirroring a trend among US peers like Goldman Sachs and Morgan Stanley.