UBS AG, Switzerland’s biggest bank, surprised the market by reporting a Q3 loss at its investment bank, while wealth management recorded its first net new client investments since 2008.  Wealthy clients added about $1.3 billion in the period - the first inflows since before the collapse of Lehman Brothers Holdings.  The securities unit lost $418 million;  analysts were expecting a $200mn profit.

As of 12:30 ET, UBS shares were down $1, or 5.6%. 

CEO Oswald Gruebel blamed “very low levels of client activity” and a charge on the bank’s own debt for the investment-banking loss.  “[Q3] was unusual in that there were very low levels of client activity, as well as a strengthening of the Swiss franc against most major currencies. ..."  CFO John Cryan said, “There doesn’t seem to be that market-driven impetus behind our clients’ trading or investing through the bank, so that’s a reason for some degree of caution;  whether that becomes the new normal for a few quarters, it’s difficult to say.”

Sanford Bernstein analyst Dirk Hoffmann-Becking noted that, “With limited capacity or appetite for proprietary trading, UBS struggles to smooth out the ups and downs of client flows. ... As and when client flows return, UBS should see a material uptick in performance.”

    Wealth Management Update.   Rich clients started defecting from UBS in 2008 as the bank piled up record losses in the financial crisis, became engulfed in a U.S. investigation over tax evasion by some customers and lost client advisers.  UBS also gave up its top spot in the ranking of wealth managers to Bank of America.

Since then Gruebel, who joined UBS in February 2009 out of retirement, hired Robert McCann, 52, a former Merrill Lynch executive, to run wealth mgmt in the Americas.  Lukas Gaehwiler, 45, from Credit Suisse came in as CEO for Switzerland and co-head of wealth mgmt and Swiss bank unit with Juerg Zeltner, 43.  In August, Jakob Stott, 55, previously with JPMorgan Chase, was hired to run wealth management business with European clients that hold their assets where they reside, along with other changes.   [Bloomberg, 10/26]