Switzerland's biggest bank UBS AG reported a 54 percent drop in first-quarter net profit for 2012 that it blamed Wednesday on a loss at the investment bank, an accounting charge on its debt and difficult market conditions.

First-quarter net profit fell to 827 million francs ($910 million) from 1.81 billion francs in the same period last year, the bank reported before trading opened in Zurich. The results did not meet analysts' average estimate for a net profit of 1.2 billion Swiss francs ($1.32 billion).

UBS also offered a somewhat grim outlook for the second quarter of 2012, owing to Europe's sovereign debt crisis, the U.S. federal deficit and continuing global uncertainties.

"Failure to make progress on these key issues would make further improvements in prevailing market conditions unlikely and would have the potential to continue the headwinds for revenue growth, net interest margins and net new money," the bank reported.

Chief Executive Officer Sergio P. Ermotti said despite the "challenging market conditions" the bank had performed well.

"We improved operational performance across all our businesses, strengthened our leading capital ratios further, reduced risk-weighted assets and remained vigilant on costs," he said in a statement. "The strong net new money inflows in our wealth management businesses provide further clear evidence of the trust our clients place in UBS."

It was just the second quarter for the bank under the leadership of Ermotti, who took over in September with the aim of restoring clients' trust following a case of alleged rogue trading in its investment bank that cost UBS $2 billion. Ermotti pledged to tighten oversight at UBS and restructure the ailing investment banking unit where the trading scandal occurred.

Last month, the specter of a damaging tax evasion case rose again. After resolving a long-running tax probe in the United States with a $780 million fine and the handover of thousands of client files, UBS now faces allegations by former staff in France that it also helped French clients cheat on their taxes.

The bank strenuously denies the allegations and says it will defend itself using "appropriate legal means."

The first-quarter results for 2012 also were a turnaround from the last quarter of 2011 when the bank, Switzerland's biggest by market capitalization, posted a net profit of 319 million francs.

Rival Credit Suisse reported a 95 percent drop in first-quarter net profit last week due to writedowns, staff severance costs, bonus payments and the strong Swiss franc.