UBS warns over impact of credit turmoil
A leading investment bank today warned profits were likely to fall if the current turmoil in global credit markets continued.
Swiss giant UBS gave the gloomy prediction despite unveiling a 14% rise in underlying second quarter profits to 3.46bn Swiss francs (€2.1bn).
UBS said: “If the current turbulent conditions prevail throughout the (third) quarter, UBS will see a very weak trading result in the investment bank, offset by predictable earnings from wealth and asset management.
“This makes it more likely that profits in the second half of 2007 will be lower than in the second half of last year.”
Financial stocks have been under pressure in the recent market shockwaves as more expensive borrowing costs threaten to dampen lucrative M&A activity.
Fears have grown over the exposure of leading banks to losses in the US sub-prime mortgage market, leading to increased caution from lenders and higher borrowing costs.
Citigroup analyst Jeremy Sigee said the firm’s outlook was “bearish” despite the increase in profits.
