UBS foresees 'very strong' credit and fixed income business in '08

By Aaron Hochman-Zimmerman

New York, Aug. 14 - UBS AG projected a calmer market in 2008 and announced its "best quarter ever," during its second quarter conference call.

Marcel Rohner, UBS' chief executive officer, said he expects the current "market disruption" to be short-lived.

Spreads have often returned to relatively normal levels after volatility creates ebbs and flows in the market, Rohner said.

"We feel pretty positive about most fundamentals we observe in the world economy ... We see good corporate balance; we see good corporate earnings," Rohner said.

Within the next calendar year, Rohner predicts "a very strong credit/fixed income business."

"Structured credit has been performing extraordinarily," Rohner said.

Although markets sectors have had draining effects on each other over the summer, Rohner and chief financial officer Clive Standish expect UBS to show success in multiple markets.

"Then we have an emerging markets business which has done extremely well, a global syndicated finance business which has done extremely well," Rohner said.

"Over the cycle these businesses will become even more important," Rohner added.

Standish and Rohner acknowledged the potential for the current crisis to linger long enough to do serious damage, but both feel it is a remote possibility.

The pair reiterated their faith in world fundamentals and specifically mentioned their high expectations of Asian and European markets.

Not every announcement was positive for UBS.

Due to its exposure to the U.S. subprime market, the Zurich-based bank, as previously announced, disbanded its hedge fund Dillon Read Capital Management.

Dillon Read Capital Management's remaining holdings have been dispersed to other parts of UBS.

"We have closed this failed initiative," Rohner said.

UBS also hopes to expand its market share if the current downturn presents attractive buying opportunities.

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