UBS third quarter net profits dropped 39% thanks to the rogue-trading scandal that cost $2.3bn. Profit fell to 1.02bn Swiss francs ($1.2bn) in the three months ended Sept. 30 from 1.66bn francs in the period a year earlier. The trading loss and charges linked to a cost-cutting plan were partly offset by an accounting gain on the bank’s own credit of 1.8bn francs and the sale of some investments. The rogue-trading scandal led to charges of fraud and false accounting for former trader Kweku Adoboli and led to the resignation of Oswald J. Grübel as chief executive. Sergio P. Ermotti, the interim chief executive, is now scaling back the struggling investment banking operation, which makes up a large part of the bank’s costs. The move will free up capital to invest in its more successful wealth management unit. UBS is expected to present its new strategy for the unit to investors in New York on Nov. 17. The bank said its plan to reduce costs, which include the elimination of 3,500 jobs, was on track. The pretax loss at the investment banking unit widened to 650mn francs from 406mn francs because of the trading loss. Earnings at the wealth management unit rose: net new money in that operation was 7.8bn francs in the third quarter compared with 8.2bn francs in the second quarter. UBS also said it had filed a document with the SEC identifying problems with its internal controls. One problem was an ineffective system to confirm counterparties of certain trades, while another was a weakness in internal controls to ensure that trades were accurately recorded in the bank’s own books. The bank said it was addressing these issues. [Dealbook, 10/25/11]