UBS has recorded an operating loss for the third quarter of SFr726 million, in the middle of the indicative range of SFr600-800 released by the Swiss bank on 1 October 2007.

The bank said the deterioration in its performance in the third quarter was mainly due to the substantial losses and writedowns in trading positions related to the US sub-prime residential mortgage-backed securities market, leading to losses of SFr4.2 billion in the Investment Bank's fixed income, currencies and commodities business.

But the bank’s Global Wealth Management & Business Banking pre-tax profit was a record SFr2,388 million in third quarter 2007, an increase of SFr47 million, or 2 per cent, from second quarter 2007.

Pre-tax profit for Wealth Management International & Switzerland business, at an all-time high of SFr1,616 million, was up 5 per cent from the second quarter.

Total operating income increased 4 per cent as recurring income rose due to the higher average asset base. Non-recurring income, however, fell slightly on lower levels of client activity in the quarter.

Operating expenses rose 3 per cent from second quarter.

Personnel expenses were up, mainly reflecting higher personnel levels and performance-related accruals. General and administrative expenses rose marginally.

In third quarter 2007, pre-tax profit in the Wealth Management US business was SFr181 million, up 12 per cent from SFr161 million in second quarter 2007.

In US dollar terms, pre-tax profit increased 14 per cent to a record $151 million. The improvement was due to lower general and administrative expenses, reflecting a significant decline in legal and litigation expenses. Total operating income fell 1 per cent in Swiss francs, but was up 1 per cent in US dollar terms.

Total operating expenses were down 2 per cent and down 1 per cent in US dollar terms, reflecting a decline in legal and litigation costs.

Personnel expenses were up 1 per cent, a result of increased financial advisor compensation related to higher compensable revenue, and a rise in salary costs.

Business Banking Switzerland reported a pre-tax profit of SFr591 million, down from SFr637 million in second quarter, when it recorded a number of revaluation gains from equity participations.

Total operating income fell marginally from second quarter, despite a rise in interest income, and operating expenses were down slightly, reflecting lower performance-related accruals.

Year-on-year comparisons were more favourable. Total operating income in Wealth Management International and Switzerland was SFr3,315 million up 27 per cent and in the US SFr1,678, up 18 per cent. Profit before tax in the US rose a whopping 321 per cent compared to last year.

UBS’ wealth management units recorded inflows of SFr40.2 billion this quarter, up from SFr26.8 billion in third quarter 2006.

Inflows in the international and Swiss wealth management business rose by SFr 11.7 billion to SFr35.1 billion, with strong contributions from all regions said the bank.

Net new money in European wealth management was a record SFr7.3 billion in third quarter 2007, up from SFr2.7 billion in third quarter a year earlier, reflecting stronger contributions from all markets except Italy.

Inflows into the domestic wealth management business in the US were SFr5.1 billion in third quarter, up from SFr3.4 billion a year earlier on inflows from new clients, driven by an increased number of financial advisors.