UBS AG reported Tuesday that it managed a third quarter net profit 296 million Swiss francs (US$251.9 million), in line with its pre-announcement, as market conditions deteriorated.

The wealth and asset management businesses and Business Banking Switzerland saw pre-tax profits net of exceptional items down from the previous quarter, the bank said. It also saw net new money outflows, which were most pronounced in September, reflecting a number of factors, including clients seeking to diversify their exposure to individual financial institutions, a general trend of clients to deleverage, the poor investment performance of certain funds in prior periods, and concerns on the part of some clients about the financial position of UBS, it said.

In the Investment Bank, revenues generated by the advisory and capital markets business were down significantly, driven by a drop in capital markets revenues reflecting reduced market volumes across all geographical regions, it reported. Sales and trading results were affected by losses and writedowns on legacy risk positions. Revenues from equities were down despite a strong performance in derivatives. Fixed income, currencies and commodities were still negative due to losses and writedowns on legacy risk positions; however these were lower than in the previous quarter. Foreign exchange and money markets had a record quarter.

The bank noted that third quarter results included a gain on its credit of CHF 2,207 million and a tax credit of CHF 913 million. Its results were also impacted by realized and unrealized losses of US$4.4 billion on legacy risk positions, mainly on exposures related to US residential real estate-related securities and other credit positions.

UBS continued to reduce exposures to risk positions throughout the quarter, largely through sales and to a lesser extent further writedowns. Exposures to US residential real estate-related positions were reduced by almost 50% by quarter end. And, in October, it announced a deal with the Swiss National Bank to transfer up to US$60 billion of currently illiquid securities and other assets from UBS’s balance sheet to a separate fund entity.

The bank said its capital ratio remains strong with a tier 1 ratio of 10.8% and total capital adequacy ratio of 14.9%. Its balance sheet was reduced by 4% from the previous quarter, with significant reductions in risk positions partly offset by an increase in positive replacement values and the appreciation of the US dollar against the Swiss franc over the quarter.

Total operating expenses were down by 26%, personnel expenses declined by 13% from the previous quarter, reflecting lower accruals for performance-based compensation, and headcount was reduced by almost 1,900.

UBS said it expects that the conditions seen at the beginning of fourth quarter will continue to affect clients’ assets, and therefore its fee-earning businesses. Operating expenses will continue to be trimmed where possible. Fourth quarter results will be impacted by a possible reversal of own credit gains and a loss on the equity in the fund to be controlled by the SNB, it also warned.

UBS also announced that Philip Lofts has been named Group Chief Risk Officer and a member of the Group Executive Board, effective immediately. Lofts replaces Joseph Scoby, who has decided to return to his former role as Global Head of Alternative and Quantitative Investments within UBS Global Asset Management. Lofts most recently served as Deputy Group Chief Risk Officer and Group Risk Chief Operating Officer.