UBS back to profit in fourth quarter

UBS, left damaged by the credit crisis and a bitter U.S. tax row, is struggling to secure the sustainable recovery it needs to win back the trust of clients and investors, particularly as a U.S. settlement is now in question and the Swiss banking industry's culture of secrecy remains under attack.

Pressure from an aggressive Italian tax amnesty in the final quarter of 2009 added to persistent brand damage that has hampered UBS' performance in the last two years, and CEO Gruebel said the bleeding of client money would continue.

"In the immediate future we still expect to report outflows," Gruebel and Chairman Kaspar Villiger - a former Swiss minister brought in to help clinch the U.S. tax deal - told investors.

UBS posted fourth quarter net profit of 1.205 billion Swiss francs (721 million pounds), its first positive quarter since the third quarter of 2008, partly helped by one-off tax credits, lower-than-expected own credit charges and a cut in bonuses.

Profit was ahead of expectations of 326 million francs in a Reuters poll.

"The money outflows will dominate the discussion today so the share will likely come under pressure," said Kepler Capital Markets analyst Dirk Becker, noting margins were being eroded.

"They beat expectations but it looks like it was only because of non-operational items."

"The one big (thing) they achieved was to get back into profit in the fourth quarter, but it was expected. Obviously it would have been worse if they had not managed to do this."

Shares in UBS were indicated to open down 1.5 percent. The stock has lost 12 percent so far this year and is struggling to recover from an all-time low last year after the bank posted Switzerland's largest ever annual loss in 2008.