UBS chief executive Oswald Gruebel said Paine Webber, the bank's U.S. wealth management unit, is non-core but the bank will not sell at present, the Financial Times quoted him as saying.

We've had a lot of inquiries from potential buyers, but it wouldn't make sense to sell at current valuations, Gruebel said, according to the report on Tuesday.

Gruebel also told the newspaper the bank wanted to cut ties with the Swiss government by buying its way out of a bad bank deal and aimed to return to health within a year.

The bank has locked horns with Switzerland's financial regulator, FINMA, over its aim to leave the bad bank scheme, under which it pays for protection against big losses on toxic assets, the paper said.

With the credit markets recently recovering, the bank believes it could take the assets back onto its balance sheet, but conceded it may not be able to do so until late 2010, the newspaper said.

It is very expensive, Gruebel said of the bad bank scheme in an interview with the FT.

(Reporting by Martin de Sa'Pinto; Editing by Dan Lalor)

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