Swiss bank UBS AG lowered its annual earning forecasts and announced fresh job cuts Tuesday after posting sharply diminished second-quarter net profits of 1.02 billion Swiss francs ($1.2 billion).
UBS said net profit fell almost 50 percent from 2 billion francs in last year's April-June period and was below analysts' predictions of more than 1.3 billion francsOperating income fell to 7.17 billion francs from 9.19 billion francs.
Investors were spooked by the report and sent shares in UBS down 2.2 percent to 13.60 francs ($16.93) on the Zurich exchange.
"Banks' returns have declined overall in the last 12 months, reflecting deleveraging and the actions being taken in advance of increased capital requirements," chief executive Oswald Gruebel said in a statement.
He said the bank wouldn't achieve the target it set for itself in 2009, shortly after Gruebel came into office. At the time, the bank said it would aim for a pretax profit of 15 billion francs a year by 2014.
UBS declined to say how many staff would lose their jobs in the cost-cutting exercise that aims to save 1.5-2 billion francs over the next two to three years. But it did indicate that it would book "significant restructuring charges later this year." Media reports in Switzerland have been for 5,000 job losses at the bank, which currently employs some 65,000 people worldwide.
Analysts at Zuercher Kantonalbank said the planned cuts don't bode well for UBS's management forecasts.
UBS chief financial officer Tom Naratil warned that market conditions would continue to be difficult in the coming months.
"The current economic uncertainty ... shows little sign of abating and we believe it will have effects on the broader banking industry," he told reporters. "We don't envisage material improvements in market conditions in the third quarter of 2011, given the usual seasonal decline in trading activity."
Naratil said the bank would now concentrate on shoring up its profits, but added that "we won't increase risk excessively in order to achieve any of our objectives."
The Zurich-based bank won't be paying a shareholder dividend in the foreseeable future, he said.