UBS lost $356 million by investing in Facebook shares

Swiss bank UBS lost 349 million Swiss francs ($356 million) by investing in Facebook shares, more than halving its profits.

UBS’s second quarter profits were $425 million Swiss francs ($434 million), compared with 1bn francs a year earlier.

Facebook was valued at $104 billion at its flotation in May, but the shares are now 39% below the initial sale price.

As a result, UBS’s investment bank reported a loss in the quarter, compared with a profit of 730 million Swiss francs a year earlier.

UBS warned that failure to resolve problems within Europe’s banking system “accentuated by the reduction in market activity levels typically seen in the third quarter” meant its next set of earnings were likely to be flat.

As a result, UBS said it would look at making further cost savings. The Swiss group is already in the process of cutting 3,500 jobs.

The company also said it was on target to meet new Basel III bank rules and would not have to issue new shares to generate additional money.

Its ratio of high quality – tier 1 – capital to lending was 8.8%, just shy of the 9% that will be required from next year.

Deutsche Bank has reported a 63% fall in second quarter earnings to 375 million Euros ($460 million) from 969 million Euros last year.

Like UBS, Deutsche blamed the economic downturn in Europe and the US for lower fees and commissions as firms cut back on big deals and share sales.

In a joint statement, Deutsche’s co-chairmen Jürgen Fitschen and Anshu Jain said: “The European sovereign debt crisis continues to weigh on investor confidence and client activity across the bank.”