UBS, the Swiss wealth manager and investment bank, gave warning today that profits during its second half would fall below the same period last year if current market volatility continued.

While profits for the three months to the end of June rose 14 per cent, UBS said that markets were very volatile at present and that forecasting was even more difficult than usual.

The bank said: "If the current turbulent conditions prevail throughout the [third] quarter, UBS will probably see a very weak trading result in the investment bank, offset by predictable earnings from wealth and asset management.

"This makes it likely that profits in the second half of 2007 will be lower than in the second half of last year."

BACKGROUND

• Boardroom mutiny as a chairman is snubbed

• Wuffli goes as boardroom rift opens up at UBS

• UBS topples Goldman in half-time deals table

• Ospel nearly quits after protege not promoted

• Another top UBS banker quits

Silent UBS assassination augurs HSBC tie-up

On Thursday UBS announced another wrenching change, accompanied by another altogether improbable explanation

Related Internet Links

• UBS company information

• UBS share price chart

Related Links

• Another top UBS banker quits

• Losses force UBS to shut Costas' hedge fund

• UBS topples Goldman in half-time deals table

In the final six months last year, profits hit SwFr5.5 billion (£2.3 billion). The share lost 3 per cent in early trading in Europe.

UBS's investment banking division has been blighted by a number of high-profile departures in recent months.

In May, Jeff Raich, co-global head of mergers and acquisitions, left the Swiss bank only weeks after the departure of Hartmuth Jung, the vice-chairman of global investment banking.

In March, Ken Moelis, investment bank president and a veteran dealmaker, who helped to build the bank into a top M&A player over the past six years, announced that he would step down in June, and Jeff McDermott, the co-head of investment banking, resigned.

Today's results are the first to be announced since Peter Wuffli resigned as chief executive after the UBS board rejected him as its new chairman to succeed Marcel Ospel.

Mr Wuffli was replaced by Marcel Rohner, who headed up UBS's wealth management business.

The bank revealed that the collapsing US sub-prime mortgage market had contributed to fall of SwFr230 million in revenues from fixed income and it described the division's performance as "not satisfactory".

Commenting on its fixed-income division, the bank said: "Continued difficulties in the US mortgage securities market led to lower revenues in the rates business."

UBS announced last week that Andre Esteves, who leads its Latin American business, would become head of its fixed-income division, replacing Simon Bunce, who is leaving the 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.

The bank's fixed-income division also sustained an impact from the closure of Dillon Read Capital Management (DRCM), an alternative investment venture set up in 2006, which was failing to meet expectations.

DRCM, set up during Mr Wuffli's tenure, lost SwFr150 million in the first quarter and has now been closed down.

UBS said that its asset and wealth management were strong, and that there were a "promising" number of deals in its investment banking division, which also generates profit from corporate finance, equity and debt underwriting.

In the second quarter to June, profits rose to SwFr3.4 billion driven by a 26 per cent increase in net fee and commission income.

Including a SwFr1.9 billion gain from the sale of its 20.7 per cent stake in Julius Baer, the Swiss private bank, profits rose by 79 per cent to SwFr5.6 billion.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax