Swiss banking giant UBS reports that net profit attributable to shareholders reached 3.3 billion Swiss francs in the first quarter, down from the same quarter last year.

The Q1 result comprises both continuing and discontinued operations, and represents a decline of CHF 229 million from first quarter 2006, when results included a CHF 290 million after-tax gain from the sale of Motor-Columbus. In UBS’s core operational businesses, profit was a record CHF 3.2 billion in first quarter 2007, up 4% from both first and fourth quarter 2006.

UBS says that its performance was driven by revenue growth in all businesses, despite negative trading revenue from the Investment Bank’s proprietary capital of approximately CHF 150 million due to difficult market conditions in US mortgage securities.

“Fee and commission income has reached its highest level since 2001, and represents more than half of our total income. Invested asset levels totalled CHF 3.1 trillion, up 4% from the beginning of the year, reflecting strong net new money inflows. This drove asset-based fees up in both the wealth and asset management businesses,” said Clive Standish, UBS chief financial officer.

Compared with first quarter 2006, fee-based revenue in the Investment Bank grew substantially in all businesses, the firm reports. UBS gained market share in both equity and debt underwriting. In corporate finance, UBS took advantage of the continued market momentum in mergers and acquisitions, improving the firm’s competitive position in all regions, it says.

Higher fees from exchange-traded derivatives business bolstered performance, reflecting the positive effect of last year’s acquisition of ABN AMRO’s global futures and options business, UBS says. Net income from trading businesses rose in first quarter 2007, with equities, in particular, being positively impacted by favorable market conditions in Europe and Asia Pacific, it says.

Additionally, the firm notes that the prime services business benefited from increased client balances and fixed income revenue improved compared with the same quarter last year on strong performances in the structured credit, global credit strategies and syndicated finance businesses. “Foreign exchange and cash collateral trading was strong across the board, with high volumes more than offsetting the effect of global increases in interest rates. Emerging markets, base metals and structured products all had a very strong quarter marked by significant growth,” it says.

UBS says that its first quarter performance also shows the strength of the wealth management business. It added CHF 44.8 billion in net new money in first quarter.

Looking ahead, UBS says, “While it is likely that the economic expansion in the US will slow down over the next few months, there is increasing evidence from global macroeconomic data — most notably from Europe and major emerging markets — that the rest of the world economy is in good shape. In particular, UBS does not expect the difficulties being experienced in the US mortgage market to have a negative long-term effect on a global scale.

“UBS is convinced that clients will increasingly seek its advice, with financial markets just as challenging as ever. The deal pipeline remains strong and its business model and balanced global presence provide it with many opportunities,” it adds.

“Over the course of 2007, we will concentrate on consolidating the investments we initiated last year. We will also continue to manage capital, risk and costs in disciplined fashion — and in line with market developments. The performance of our business — in common with the financial industry — tends to be stronger in the first quarter of the year than in the summer. In the past, we have repeatedly proven our strength in delivering strong returns throughout the business cycle, which makes us confident that 2007 will be another successful year of growth for UBS,” said Clive Standish.