In an unscheduled announcement, the world's second-largest wealth manager said first-quarter pretax profit was at least 2.5 billion Swiss francs ($2.3 billion), nearly three times higher than the previous quarter.
Profit was likely driven by strong fixed-income revenue, particularly in forex trading, where UBS has a 15 percent market share.
The Swiss bank added that money withdrawals by rich clients, disappointed with its losses during the financial crisis and with its U.S. tax woes, had shrunk to a third of what they were in the previous quarter. That surprised some analysts and helped push shares 4 percent higher.
Net new money outflows in all businesses were substantially lower than in fourth quarter 2009, UBS said.
Chief Executive Oswald Gruebel on Wednesday will face some disgruntled shareholders who are ready to reject a UBS bonus system and plans to clear management of responsibilities for the crisis, but the surprise profit statement could take the edge off some of the tension.
UBS is due to report full first-quarter figures on May 4.
While UBS' investment bank is on the mend, persistent bleeding of client money has been Gruebel's toughest challenge. Since the middle of 2008, 225 billion Swiss francs have left the bank, or about 11 percent of total assets.
What is of surprise is the net new money which we believe is a sentiment change for investors that UBS is going in the right direction now, said Vontobel analyst Teresa Nielsen.
UBS' pretax profit would be above a mean estimate of five analysts of 2.375 billion Swiss francs, ThomsonOne data show.
UBS said on March 30 first-quarter fixed-income division revenues would be nearly $2.3 billion.
At 4:37 a.m. ET, share in UBS were up 4.1 percent, outperforming a 1.1 percent rise in the Stoxx Europe 600 banking index <.SX7P>
This short interim statement points to the question of whether the glass is now half empty or half full, analysts at bank Wegelin said in their morning report.
The return to profit is welcome and the weakening of outflows is encouraging. But how sustainable is the earnings development and when will client withdrawals stop?
ON TRACK FOR TARGET
Strong first-quarter earnings are putting Gruebel, a former Credit Suisse CEO who was pulled out of retirement in February 2009 to turn around UBS, on track to achieve its mid-term target of annual pretax profit of 15 billion francs, analysts say.
After posting the biggest annual loss in 2008, UBS returned to profit in the final quarter of 2009, the first quarterly profit for the bank since Gruebel took over.
But some investors are angry at how UBS management, led by former chairmen Marcel Ospel and Peter Kurer, drove the bank close to collapse and they may still reject proposals to clear executives from responsibilities in 2007, 2008, and 2009.
What came out today will not change the negative feeling investors have against the discharge of management, said one analyst.
Discharging executives from their responsibilities would make it more difficult to pursue legal action against them.
Total first-quarter outflows at UBS would be only a third of the around 56 billion francs the bank bled in the final quarter of 2009, with a much improved performance at UBS' main Wealth Management and Swiss Bank business.
UBS estimates net outflows at the division of around 8 billion francs, or less than 1 percent of assets.
The bank said withdrawals at the Wealth Management Americas division would be 7 billion francs and that it saw withdrawals of 3 billion francs in Global Asset Management.
We expect the reduced outflows to enhance confidence in the overall franchise, said KBW analyst Matthew Clark.
With relatively few global, scale plays on the attractive wealth management sector, we believe a rehabilitated UBS could ultimately enjoy a premium rating to the banks sector.
(Additional reporting by Rupert Pretterklieber; Editing by Erica Billingham)
($1=1.071 Swiss Franc)