By Lisa Jucca and Albert Schmieder
LUCERNE, Switzerland (Reuters) - Swiss bank UBS, at the center of a U.S. investigation into offshore services it provided to wealthy Americans, said on Thursday it had uncovered a "limited number" of tax fraud cases.
"Our investigations have uncovered a limited number of cases of tax fraud under both U.S. and Swiss law," Chairman Peter Kurer told over 2,000 UBS shareholders meeting to approve a 6 billion Swiss franc ($5 billion) government cash injection.
Kurer, who took his post in April, reiterated that the bank still aimed to make a profit in 2009, although he stressed that market conditions remained difficult. UBS made a small profit in the third quarter, mainly thanks to tax gains and accounting factors, but analysts expect it to take a new hit this quarter.
UBS, which has made more write-downs than any European bank in the credit crisis, is also under pressure from the U.S. investigation, which led to the indictment of the bank's head of global wealth management earlier this month and threatens to weaken Switzerland's prized bank secrecy.
But bank-client confidentiality, a pillar of Swiss banking, "is not there to protect cases of tax fraud," Kurer said, suggesting the bank could be ready to hand over some client details to U.S. authorities as part of a possible settlement.
The U.S. authorities are seeking the names of about 17,000 U.S. clients of UBS who have Swiss-based bank accounts. But Swiss lawyers representing U.S. clients of UBS have said Switzerland is considering disclosing information on only a few hundred.
HUMBLE APPROACH
Kurer, who is trying to rebuild the bank's reputation after it made about $49 billion write-downs on risky subprime assets, said UBS had taken broad measures to address its shortcomings, including aggressively reducing its balance sheet and overhauling its pay structure.
The chairman said he was personally replying to the many angry shareholders that had written to express their discontent with UBS, formerly an icon of Swiss banking whose stock used to be popular among Swiss retail investors.
"Let me reassure you ... there is no room for arrogance in the UBS of today, nor will there be in the UBS of tomorrow," Kurer said, bringing applause from shareholders.
UBS executive board members have given up their bonuses this year and former executives have given back a total of 70 million Swiss francs of payments from the bank, Kurer said. Ex-chairman Marcel Ospel, whose drive into investment banking many analysts blame for UBS's present woes, also returned some of his pay.
Kurer gave no indication in his speech of to what extent UBS was stemming client money withdrawals, which totaled a record $49 billion in the third quarter in its core wealth management business.
UBS said earlier this month the pace of client outflows had started to ease after the Swiss government announced a 6.0 billion Swiss franc injection on October 16 in the form of a convertible bond that will eventually give the state a stake.
The rescue package also allows UBS to hive off up to $60 billion of illiquid assets in a special central bank-controlled fund.
The government aid package, "has helped bolster confidence in UBS and the Swiss banking and financial services industry as a whole," Kurer said.
UBS shares, which have lost more than two thirds of their market value this year, rallied more than 4 percent earlier on Thursday, but later trimmed gains. They were up 1 percent at 14.95 Swiss francs at 1013 GMT, when the DJ Stoxx European banking sector index was up 1.7 percent.
($1=1.199 Swiss francs)
(Editing by Greg Mahlich)
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