Swiss bank UBS has reported an 18 per cent drop in first-quarter net profit, to 1.81 billion Swiss francs ($A1.92 billion)) from 2.2 billion francs a year ago, as the strength of the franc against other major currencies took its toll.
UBS, which does much of its business outside Switzerland, said the US dollar was worth about 15 per cent less during the first three months of the year compared with the same period in 2010.
"We'll continue to see that effect for some time," John Cryan, the bank's chief financial officer, told reporters. The year-on-year difference in April was about 20 per cent, he added.
Analysts had expected UBS to report lower earnings in the first quarter as year-ago profits were boosted by one-off factors.
Operating income fell 7 per cent to 8.34 billion francs, the bank said.
Net new money - an important indicator of future business - increased by 22.3 billion francs. UBS reported a net outflow of 18 billion francs in the first quarter of 2010.
The Zurich-based bank played up its 7 per cent improved profit compared with the last quarter of 2010, citing higher trading income from its investment banking unit. But UBS also benefited to the tune of some 150 million francs from freeing up reserves it had set aside for lawsuits and regulatory changes.
UBS said it expects volatile currency exchange rates due to Europe's sovereign debt crisis and economic turmoil in the Middle East and Japan to offer attractive investment opportunities in the second quarter.
Costs will increase, too, as the bank fights to stop top staff from defecting to the competition. Cryan said base salaries increased by 5 to 10 per cent.
Observers have questioned the bank's mid-term target of annual net profit of 15 billion francs in light of greater regulatory demands in Switzerland.
Cryan said UBS stands by that figure."We're not deviating from our targets today," he said.
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