UBS AG, the European bank with the biggest losses from the credit crisis, is poised for an earnings rebound that may help it catch up to Credit Suisse Group AG.

Zurich-based UBS may report its first annual profit since 2006 this year after spinning off $38.7 billion in toxic assets into a central bank fund, cutting 18,500 jobs and appointing 11 new managers to the executive board, including a chief executive officer. The bank reports fourth-quarter 2009 earnings tomorrow.
“UBS was a catastrophe,” said Eric Bendahan, who manages Banque Syz & Co.’s 1.8 billion-euro ($2.5 billion) Oyster European Opportunities Fund and counts UBS as one of his three largest holdings. “But if things get back to normal, the potential is colossal, while Credit Suisse did its job so well that its potential in the future is much smaller.”
The man UBS is counting on to bring it back to health is CEO Oswald Gruebel, 66, who led a turnaround at Credit Suisse before retiring in 2007. Hired to run UBS almost a year ago, he’s relying on a recovery at its investment bank to help increase pretax earnings to 15 billion Swiss francs ($14 billion) in three to five years.
Credit Suisse, which will probably report record earnings at its securities unit for 2009 on Feb. 11, may find it harder to increase profits as competitors sidelined by the financial crisis, such as UBS, return to the market.
A recovery in profit may help UBS shares play catch-up, analysts said. The stock has fallen 6.5 percent in Swiss trading since the end of 2008 and trades at 1.24 times book value, about half the average of 2.56 times since 1997.
Credit Suisse stock rose 55 percent in the same period and trades at 1.35 times book value, compared with an average of 1.74 times since 1990, Bloomberg data show. Before today both UBS and Credit Suisse were down 14 percent this year.
UBS rose as much as 2 percent today, and was 1.2 percent higher at 14.05 francs by 11:00 A.M. in Zurich trading. Credit Suisse fell 0.4 percent to 43.93 francs.
“There is a much greater scope for UBS to positively surprise than for Credit Suisse,” said Matthew Clark, a London- based analyst at Keefe Bruyette & Woods Ltd., who rates UBS “outperform” and Credit Suisse “market perform.”
UBS, Switzerland’s largest bank by assets, may earn net income of 5.51 billion francs this year, according to the median estimate of 20 analysts surveyed by Bloomberg. The bank reported a 21.3 billion-franc loss in 2008, the biggest in Swiss corporate history. Credit Suisse, its largest Swiss rival, may eke out a 2.8 percent increase in profit to 7.6 billion francs in 2010, according to analysts.
(Source: Bloomberg)