Swiss bank UBS expects first-quarter revenue in its rebuilt fixed income business to be slightly below $2.3 billion, it said on Tuesday.

The fixed income division made a loss of 547 million Swiss francs ($516 million) in 2009, following a loss of 31.9 billion francs in 2008, which brought the bank to the brink of collapse and forced the Swiss government to bail it out.

News agency Bloomberg had reported that first-quarter revenue at the unit would be around $2.3 billion.

Because the quarter has not ended and results to date are subject to possible fair value adjustments, including those relating to own credit, this (Bloomberg) forecast may not be reliable, the bank said.

UBS will issue first-quarter results on May 4.

Its shares were up 4.2 percent at 17.30 Swiss francs at 1126 GMT (0726 EDT), making it the strongest performer in an overall softer Stoxx Europe 600 banking index <.SX7P>.


Chief executive Oswald Gruebel has set a mid-term target of annual revenues of 8 billion francs for the unit.

Investment bank head Carsten Kengeter said in a recent newspaper interview, the unit should return to profitability for full-year 2010.

Analysts said a return to solid revenue in the fixed-income business would be welcomed by investors ahead of the bank's annual general meeting on April 14, though they cautioned against taking the reported figure at face value.

It needs to be asked how the revenues were actually earned, Helvea analyst Peter Thorne said in a note.

If it was from client flows with minimal risk taking that would be most encouraging if unlikely, he said. If it were just the mark-up of some legacy positions, then that would be not so positive.

UBS may have generated revenue of almost $1 billion from credit alone, Bloomberg said.

The bank has hired about 350 people at its fixed income unit, which includes emerging markets and foreign exchange, in the past 12 months.

The bank's fixed income division was responsible for most of the over $50 billion in writedowns and the bank's record losses during the credit crisis.

UBS returned to profit in the final quarter of 2009 but wealth management clients continued to withdraw money, raising concern Gruebel may be struggling to steady the ship.

Nomura analyst Jon Peace said a reversal of fortunes in the private bank business still remained key for the bank.

While we expect Q1 outflows to be better than Q4, the lagged effect of advisor attrition from 2009 combined with renewed uncertainty about U.S. tax litigation is likely in our view to lead to further outflows through much of 2010, he said.

In January, a Swiss court ruled in favor of a UBS client seeking to prevent her account data being given to the U.S. tax authority, threatening a deal struck by the United States and Switzerland which would allow UBS to hand over data on clients which the United States suspects of dodging taxes.

(Reporting by Sakthi Prasad in Bangalore and Sven Egenter in Zurich; Editing by Greg Mahlich and Dan Lalor)