UBS, its management declared on Tuesday, is not in the business of chasing every last dollar of trading revenue. That much is obvious from the bank's first-quarter results.

Pre-tax profits at the investment banking division dropped a fifth year-on-year. The disappointment was largely due to weak fixed income trading revenues, which fell 14 per cent. This contrasts with a 26 per cent rise at Deutsche Bank over the same period. UBS has consciously stayed away from booming commodities and long-tail structured products, which it regards as too volatile. It also reduced trading risk during the quarter as markets worsened.

At first sight, this attitude to risk looks conservative. But UBS is in no mood to let the ups and downs of investment banking distract it from expanding its private wealth and asset management businesses. These are performing better than ever, with profits up and an inflow of $27bn of net new money in the first three months of 2005 more than any rival.

This balanced strategy has been rather successful; a 32 per cent post-tax return on equity for the quarter is best in class. Of course, UBS will underperform in an upturn. Indeed, the shares have trailed Credit Suisse by a tenth over the past two years, while still gaining 50 per cent in absolute terms. But the premium rating of 10 times estimated 2006 earnings is deserved and the stock should prove resilient in the tougher markets that seem to lie ahead.

Pre-tax profits at the investment banking division dropped a fifth, year-on-year. The disappointment was largely due to weak fixed income trading revenues, which fell 14 per cent. This contrasts with a 26 per cent rise at Deutsche Bank over the same period. UBS has consciously stayed away from booming commodities and long-tail structured products, which it regards as too volatile. It also reduced trading risk during the quarter as trading conditions worsened.

At first sight, this attitude to risk looks a little conservative - some might even say complacent. But UBS is clearly in no mood to let the ups and downs of investment banking distract it from continuing to expand its private wealth and asset management businesses. These are performing better than ever, with profits up strongly and an inflow of $27bn of net new money in the first three months of 2005 - more than any rival.

This balanced strategy has been rather successful: a 32 per cent post-tax return on equity for the quarter is best in class. Of course, UBS will underperform in an upturn. Indeed, the shares have lagged Credit Suisse by a tenth over the past two years, while still gaining 50 per cent in absolute terms. But the premium rating of 10 times estimated 2006 earnings is deserved and the stock should prove resilient in the tougher markets that seem to lie ahead.

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