UBS to buy back SFr5bn of debt UBS is to buy back SFr5bn of its own senior debt in a move it hopes will slash its funding costs, after its radical shrinking of its investment bank significantly reduced the Swiss lender's liquidity requirements. However, Switzerland's largest bank by assets warned that the programme, under which it will offer to repurchase around €2.25bn of euro and lira-denominated debt, as well as around $2.5bn of dollar-denominated securities, could cause a loss in the first quarter of this year, due to accounting rules that force banks to book profits or losses based on movements in their own credit spreads. That technical setback would mark UBS's third consecutive quarterly loss, after the bank said this morning that it had made a net loss of SFr1.89bn in the three months to December 31, having made a SFr2.5bn loss in the preceding quarter. UBS said that the fourth quarter loss, which compared with a profit of SFr323m a year earlier, was mainly due to the SFr2.1bn it set aside in provisions to deal with a variety of issues, ranging from the Libor scandal to a ruling last year by a Swiss court that asset managers must return certain fees known as retrocessions received from private clients. Sergio Ermotti, chief executive, said that the year's events had been "a stark reminder" of what could happen when banks failed to live up to the highest standards, but added that the bank had made good progress in addressing the "missteps of the past." As well as shaking up its bonus regime, UBS significantly cut back its risk-weighted assets in its investment bank, and improved its Basel III core tier one capital ratio from 9.5 to 9.8 per cent. This position of strength would allow the bank to increase its dividend 50 per cent to SFr0.15, Mr Ermotti said. The bank also booked restructuring charges of SFr258m, as it pushes ahead with its ambitious revamp of its strategy, which will lead to the departure of 10,000 staff over the next three years. The brunt of those changes will be born by UBS's investment banking division, where the Swiss bank is exiting a large number of capital-intensive business lines rendered uneconomic by tougher regulations introduced in the wake of the financial crisis. The unit lost SFr557m in the fourth quarter. UBS's other businesses performed more strongly, with its asset management arm recording SFr149m in pre-tax profit, while its non-American wealth management division posted profits of SFr398m, and the Americas division made SFr216m. However, whereas client inflows strengthened in the Americas - increasing to SFr8.8bn in the last three months of the year from SFr4.8bn in the third quarter - they slowed elsewhere. Client fund inflows dropped by SFr2.4bn from SFr7.7bn in the third quarter in regions outside the Americas, which the bank said was the result of an acceleration of funds leaving the bank from clients domiciled in western Europe. Over the year, UBS made a net loss of SFr2.5bn, down from a net profit of SFr4.1bn in 2011. However, the bank said that it had managed to improve its Basel III core tier one capital ratio from 9.5 to 9.8 per cent, and added that it would increase its dividend 50 per cent to SFr0.15 per share. UBS shares rose 0.8 per cent to SFr15.75 in morning trading.