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Why UBS’s Sunny Earnings Report is Mildly Depressing

UBS had plenty of good news to share during its second quarter earnings report, but it may not be enough.

Net income was up 32%, driven by strong wealth management earnings in the Americas and a miraculous comeback from its investment banking division, which posted an $833 million pre-tax profit, swinging from a $99 million loss a year ago. The Swiss bank’s equities sales and trading business reported its strongest second quarter in three years.

And UBS pulled the feat despite a leaner workforce. Over the past year, UBS has cut 1,272 front office investment bankers and 775 other investment banking staff, all while nearly doubling revenue per head.

So what’s the bad news? UBS Chief Executive Sergio Ermotti was, let’s say, cautious with his forecast for the third quarter and beyond. Several global markets are still a mess – as is the European sovereign debt and banking system – and with stimulus tapering looming, the U.S. market is not near as fertile as it once was, UBS said.

"I see clients positioned for these kinds of fears," Ermotti said. "Client risk appetite is not there."

Ermotti’s candor stands as a dire warning for UBS and other global banks. The riches enjoyed in the second quarter may not be around come this fall.

On another slightly sour note, UBS doesn’t appear all that close to completing its goal of reducing its workforce by 10,000 over the next few years. At the end of Q2, the bank employed 60,754 workers compared with 63,520 in the same period last year. Still a long way to go.

Tough Banking Interview Questions (eFinancialCareers)

A source at New York University’s Stern School of Business passed along a collection of real interview questions banks and consulting firms recently asked graduate students seeking internships. The questions are spread across industry and function. See how well you stack up.

Profit Tumbles (Dealbook)

Deutsche Bank’s net profit was cut in half during the second quarter due mainly to high litigation costs, higher taxes and a slowdown in financial markets trading.

Marine Tough (eFinancialCareers)

Meet Michael Buckley, owner of an MBA in Finance. But that alone wasn’t what got him hired as an associate J.P. Morgan. It was the leadership experience Buckley gained as a Marine in Iraq and Afghanistan that earned him an edge over other candidates.

Ominous Headline (Business Insider)

Vanity Fair’s September issue hits newsstands on Thursday. On the cover: “One Man’s Goldman Sachs Nightmare,” by famed financial author Michael Lewis. Any guesses?

It All Comes Back to SAC (Reuters)

Longtime West Coast analyst Sandeep Aggarwal was arrested Monday on, you guessed it, insider trading charges. He was tipping off Richard Lee, who, you guessed it, worked at SAC Capital. Lee pleaded guilty to insider trading last week.

Commodity Probe (WSJ)

It’s official. A U.S. senate committee has launched a preliminary investigation into the potential conflicts of interest banks may have by participating in the physical commodity market. When the chips fall, this could be a big story.

It Never Ends (WSJ)

Barclays followed through on its promise of issuing new stock to appease regulators worried about its capital ratios. On the same day it resolved that problem, news broke that regulators are preparing an enforcement action against the bank for its dealings with Qatari investors.

Getting Off Easy (Forbes)

J.P. Morgan settled claims that its traders manipulated energy markets in California, handing over $410 million in fines. The traders – commodities chief Blythe Masters and staffers Francis Dunleavy, Andrew Kittell and John Bartholomew – were not charged.

Buzz Around the Office

A Nine-Pointer (MSN)

Basketball trick shots are all over the Internet. It’s just hard to be mesmerized anymore. This one is different.

List of the Day: Temp Job Crossover

Offering employees temp work rather than a full-time offer is commonplace these days. Here’s how to make the jump to a permanent employee.

  1. Comment on how much you like working there.
  2. Take part in every out-of-office event.
  3. When the time is right, pop the question directly.

(Source: AOL Jobs)

AUTHORBeecher Tuttle US Editor

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