UBS sees outflows continuing

Higher-than-expected accounting charges pushed UBS into its fourth consecutive quarterly loss as it reported disappointing total outflows of 36.6 billion Swiss francs (22 billion pounds) at its key wealth and asset management divisions.

"The brand has been more hit by reputation issues than expected especially in the Americas," Vontobel analyst Teresa Nielsen said in a client note.

UBS's results contrast with stellar profits seen at European peers Credit Suisse and Deutsche Bank as UBS has exited several business lines while pushing through a tough restructuring.

"The performance at the investment bank shows sign of recovery, but significant questions remain on the wealth management front as outflows were larger than anticipated," said Sebastien Lemaire, an analyst with Natixis Securities.

UBS shares fell 4.0 percent to 16.65 Swiss francs by 8:30 a.m., underperforming a 2.1 percent weaker DJ Stoxx European banking index <.SX7P>.

UBS's net loss of 564 million Swiss francs (338.7 million pounds) was narrower than a net loss of 1.4 billion Swiss francs in the second quarter but larger than average Reuters analyst forecasts for 207 million.

"We do not expect an immediate recovery in client net new money flows," Chief Executive Oswald Gruebel and Chairman Kaspar Villiger, both appointed earlier this year to turn around the Swiss bank, said in a letter to shareholders.

But they noted that pretax operating profit excluding charges nearly doubled to 1.6 billion francs, signalling the crisis-hit bank was gradually on the mend.

"UBS expects to see further progress in restoring the underlying profitability of the business in future quarters, particularly in 2010," they said.