Switzerland's UBS today reported a larger than expected fourth-quarter profit, bolstered by a big tax benefit and a slimmed down investment bank.
The Zurich-based group maintained a conservative outlook as an ongoing rout in emerging markets unnerves wealthy clients, at the core of its private bank.
The violent swings may hit first-quarter net new money, revenue and interest margins, the bank said.
UBS's net profit for the quarter stood at 917 million Swiss francs ($1.02 billion), including a 470 million franc benefit from deferring its taxes.
The net profit figure, compared to a 1.89 billion franc loss a year ago, is nearly three times the 354 million francs analysts expected according to a Reuters poll of 16 banks and brokerages.
The earnings represent a vindication of sorts for UBS's decision to shrink its investment bank and withdraw from riskier activities such as bond trading, where falling prices have stung rivals such as Goldman Sachs, Citigroup and Deutsche Bank.
UBS's pared-back investment bank swung to a 297 million franc pretax profit in the quarter, up 18% from the quarter before, helped by its advisory and equities arms.
Profits from UBS's private bank rose 18%, but spending crept higher, in part due to higher bonuses. The unit won 5.8 billion francs in fresh funds from clients, much of it from Asia and from the very rich, or those with more than $50m to bank.
The earnings highlight that UBS has not yet shaken off its scandal-tarnished past. Switzerland financial regulator is requiring the bank to hold 22.5 billion francs in additional capital - down from a temporary add-on of 28 billion francs three months ago - to deal with future legal and regulatory risks.
The Swiss bank today said it expected elevated charges for litigation, regulatory and similar matters through 2014.
UBS is one of a number of banks co-operating with a global investigation in to possible manipulation in the $5.3 trillion-a-day foreign exchange market and it said today several class action lawsuits relating to the probe had been filed against it and other banks.
Regulatory authorities are looking at whether traders at some of the world's biggest banks colluded to manipulate benchmark foreign-exchange rates used to set the value of trillions of dollars of investments.
The bank's overall bonus pool rose 28% to 3.2 billion francs from 2012, when awards were down after UBS paid $1.5 billion to settle allegations it manipulated interbank lending rates.
UBS said the 2013 earnings will allow it to pay shareholders 0.25 Swiss francs a share for the year, two-thirds more than in 2012.
UBS repeated a pledge to pay out more than 50% of profits once its common equity Tier 1 ratio, a key measure of financial strength, hits 13%. It rose to 12.8% in the fourth quarter.