UBS said yesterday its second-quarter profit beat forecasts, even after an 865 million Swiss franc (US$920 million) charge to settle a United States lawsuit and other matters, and that its flagship private bank was continuing to win new customers.

The private bank, which attracted the most clients' money in six years in the first quarter, is the centerpiece of UBS's drive to recover from the financial crisis, after selling large parts of its fixed income business and cutting 10,000 jobs.

The Swiss bank said its second-quarter net profit rose to 690 million francs from 425 million francs in the same period last year, compared with some analysts' forecasts which were closer to 560 million francs.

But the second-quarter improvement is still way down the 1.02 billion francs that the Zurich-based bank reported in the comparable period in 2011.

UBS said its private bank attracted 10.1 billion francs of new money and its US-based brokerage attracted 2.7 billion francs, although its asset management arm suffered 2 billion francs in outflows.

"The earnings are quite a bit better than expected, capital also looks good, and net new money at the private banks surpassed our estimates," Zuercher Kantonalbank analyst Andreas Venditti said.

US lawsuit setllement

UBS said the 865 million franc charge it took included the cost of settling a US Federal Housing Finance Agency (FHFA) lawsuit over soured mortgage investments. It did not disclose details of the settlement.

The FHFA regulates US mortgage finance companies Fannie Mae and Freddie Mac after they were placed into federal conservatorship at the height of the 2008 financial crisis. It is suing a string of major banks, accusing them of violating securities laws by misleading Fannie Mae and Freddie Mac about US$200 billion in mortgage-backed securities they purchased.

The charge is likely to also include 100 million francs UBS recently disclosed as part of a withholding tax agreement between Switzerland and the UK, which came into force this year.

Under a deal, Swiss banks paid 500 million francs to Britain, which they will only receive back in full if their UK-resident clients pay at least 1.3 billion francs through the scheme, rather than direct to Britain.