UBS's Gruebel needs more time as clients pull money

The bank on Tuesday reported its first net profit since Gruebel, who had nursed rival Credit Suisse back to health, took the helm a year ago after UBS suffered the biggest annual loss in Swiss corporate history in 2008.

But UBS clients withdrew a hefty 56 billion francs, up from 37 billion in the third quarter and confounding analysts' expectations that outflows would slow after the bank settled a bitterly contested U.S. probe into help it had offered rich Americans to dodge taxes.

UBS, left damaged by the tax row and the credit crisis, has struggled to win back clients and investors, particularly as the U.S. settlement is now in question and the Swiss banking industry's culture of secrecy remains under attack.

Cost cuts and resilience in the investment bank's advisory and underwriting business but did not compensate for the torrent of client money outflows, said Helvea analyst Peter Thorne.

"These factors are overshadowed by the awful outflows from the wealth management unit and the prospect of more to come because of client advisers leaving and the worsening newsflow over Swiss bank secrecy and the U.S. tax case," Thorne said.

Pressure from an aggressive Italian tax amnesty in the final quarter of 2009 added to persistent brand damage that has hampered UBS's performance in the last two years.

"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 - said.

Shares in UBS traded 2 percent lower at 10:55 a.m. British time, lagging a 1.4 percent rise in the DJ Stoxx European banks index <.SX7P> and 3 percent gain in Credit Suisse.

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