UBS Reports Q2 Loss of $1.31 Bln

Swiss bank giant, UBS AG (NYSE: UBS), reported Tuesday a second-quarter net loss of 1.4 billion Swiss francs [CHF] ($1.31 billion) compared with 1.97 billion francs ($1.85 billion) in first quarter 2009. According to Switzerland’s biggest bank by assets, the results were driven by lower losses on risk positions from businesses now exited or in the process of being exited by the bank.

UBS said it recorded a credit loss expense of 388 million francs in Q2 compared with 1,135 million francs in Q1.The second quarter earnings included a 1.2 billion-CHF charge related to the company’s own debt, and a total operating income increase of  5,770 million CHF in Q2 from 4,970 million CHF in Q1.

The financial services firm also said its Q2 earnings included 582 million CHF in reorganization costs and a goodwill impairment of 492 million CHF related to the sale of Brazil’s UBS Pactual unit. The bank suffered $37.1 billion of outflows at its wealth and asset management divisions. The outflows were concentrated in the international business, whereas the Swiss domestic business remained stable. According to the firm, the US cross-border issue and its exit from the US cross-border business are having a major influence on the Q2 results.

The U.S. government and UBS struck a deal in principle on Friday to end tax litigation against the Swiss wealth management giant. As part of the deal, UBS will not pay a fine in exchange for handing over 5,000 names of U.S. clients holding secret Swiss accounts — about 10% of the names Washington was after.

“This is a positive development in a matter that has adversely affected our efforts to regain the trust of our clients and to restore momentum to our business,” Chief Executive Oswald Gruebel and Chairman Kaspar Villiger said of the prospective deal. [Reuters]

UBS, which on October of last year accepted a 6-billion-Swiss franc state cash injection after making $54 billion writedowns on toxic assets, said it reduced its balance sheet by a further 261 billion francs during the second quarter and held total assets of 1,600 billion francs on June 30, 2009.