Swiss bank UBS, the world's largest wealth manager, beat forecasts with record second-quarter profits today, but warned that market turmoil was likely to hit its investment banking business in the second half of the year.
In an explicit warning that the upheaval in credit markets is likely to take a heavy toll, UBS said that if turbulent conditions prevailed throughout the third quarter, "UBS will probably see a very weak trading result in the investment bank".
UBS is the first big bank to comment on trading conditions since last week's havoc in financial markets forced central banks to intervene in the interbank lending market to restore order.
Net second-quarter group profit rose to CHF5.622 billion (€3.43 billion) from CHF3.147 billion in the second quarter of 2006 and CHF3.275 billion in the first quarter.
The result included a CHF1.926 billion windfall from the sale in June of UBS's 20.7 per cent stake in Swiss private bank Julius Baer.
UBS shares were down 3.3 per cent at CHF63.85 at 0944 GMT today compared with a 0.6 per cent decline in the Dow Jones Stoxx European banking index.