UBS aims for $14.9 billion pre-tax profit in 3-5 years

UBS AG said it aims to reach 15 billion Swiss francs ($14.9 billion) in annual pretax earnings in three to five years, as Chief Executive Officer Oswald Gruebel rebuilds Switzerland’s largest bank after record losses.

UBS also set a goal for reaching return on equity, a measure of profitability, of 15 per cent to 20 per cent in the same period, the Zurich-based company said in a statement before making presentations to investors. The bank rose as much as 2.2 per cent in Swiss trading.

“These are very ambitious targets,” said Joerg De Vries- Hippen, chief investment officer for European equities at Allianz Global Investors in Frankfurt. “But that’s exactly what Gruebel needs to be at this point in time.”

Gruebel, who joined the bank in February, has announced 7,500 job cuts, sold a Brazilian unit, replaced four executive board members and tapped investors for 3.8 billion francs to bolster capital. UBS has been unprofitable for the past four quarters after losses at the investment bank and withdrawals of client funds from the wealth management business.

UBS was 10 cents, or 0.7 per cent, higher at 17.60 francs by 9:35 am in Zurich. The stock advanced 18 per cent in Swiss trading this year, lagging behind the 100 per cent rally at Credit Suisse Group AG and the 50 per cent gain in the 63-company Bloomberg Europe Banks and Financial Services Index.

“We are transforming UBS,” Gruebel, 65, told investors in Zurich. “A transformation like this is not easy. It’s not about a few quarters. Despite all the progress already made, it will be a slightly longer journey.”

The profit targets compare with pretax earnings of 14.1 billion francs and a return on equity of 23.8 per cent in 2006, the year before the credit crisis began.

UBS amassed more than $50 billion in writedowns and losses during the financial crisis, the most of any European bank, and was forced to take a lifeline from the Swiss state last year. In seeking to rebuild profitability, the bank will rely in part on its fixed-income unit, the business that brought it near collapse.

“The investment bank, in particular fixed-income, currencies and commodities trading, is probably the largest source of upside in pretax of the restructuring plan,” Huw van Steenis, a London-based analyst at Morgan Stanley, said in a note to clients.