UBS posts 1 bln franc profits despite rogue trade losses

Swiss banking giant UBS said Tuesday that its third-quarter net profit reached 1.018 billion francs (831 million euros, $1.16 billion) even though it had to take a 1.849 billion franc charge due to a rogue trading scandal. When the bank first announced the discovery in mid-September of massive fraud perpetrated by 31-year-old trader Kweku Adoboli, it warned that it might have to report a loss for the third quarter. It later said it would report a \"modest net profit.\" In its third-quarter earnings statement, the bank said an own credit gain as well as returns from the sale of treasury-related investments helped it to offset the losses. It also recorded an income tax benefit of 40 million francs. In addition, it managed to bring in 4.9 billion francs worth of net new money. UBS acknowledged that current economic conditions would likely continue to create \"headwinds for growth in revenues and net new money\" but noted that its funding positions were solid. \"We have every reason to remain confident about our future,\" it added. UBS announced the massive trading scandal on September 15, shortly after one of its traders, Adoboli, was arrested in London. He has been remanded by a London court, and will have to face a higher court in November on two charges of fraud and two of false accounting over three years at the banking giant. On Tuesday, UBS said that it has found that \"certain internal controls were not effective on December 31, 2010.\" In particular, it found a failure in the control mechanism that requires bilateral confirmation with trading counterparties for settlement dates that are greater than 15 days. When changes were made to such trades, the related controls to ensure that they were valid were also not operating effectively. In addition, checks to ensure that internal transactions were recorded accurately in its books failed. \"We have taken and are taking measures to address these control deficiencies,\" assured the bank, adding that investigations were ongoing. The trading scandal was another blow to the bank, which has been struggling to rebuild its reputation after the financial and economic crises when it lost colossal sums and was forced to turn to the state for a rescue package. In 2008 and 2009, the bank was also embroiled in a serious tax evasion spat with the United States. It was forced to hand over 300 client names and pay a 780-million-dollar fine in a first case, before a second wider case in which it finally agreed to hand over data on 4,450 American clients.