UBS AG says that it expects overcome a US$2.3 billion trading loss to report a modest net profit for the third quarter.

The Swiss bank announced Tuesday that it will report a profit for the group overall in the quarter, and that net new money in UBS’s wealth management businesses is expected to be broadly similar to the second quarter. The profit forecast includes the $2.3 billion loss resulting from unauthorized trading that was revealed last month, and approximately 400 million Swiss francs of restructuring charges associated with the firm’s cost reduction program.

The firm reports that its bottom line benefited from credit gains on financial liabilities measured at fair value of about CHF 1.5 billion, primarily due to the widening of UBS’s credit spreads during the third quarter; and a CHF 700 million gain on the sale of treasury-related investments.

UBS also says that it expects to report net new money inflows in its wealth management businesses at broadly similar levels to those of the previous quarter. Global asset management will report moderate net new money outflows, it adds.

Additionally, its capital position is expected to remain largely unchanged from the end of the previous quarter, including the loss associated with the unauthorized trading incident. The BIS Basel II tier 1 capital ratio is expected to decline slightly compared with the second quarter due to the impact on risk-weighted assets of the unauthorized trading incident.

The bank added that its previously announced cost reduction program remains on track, and that it will continue to invest in growth regions (including Asia Pacific, the Americas, and the emerging markets), as well as its global wealth management franchise.

IE