GENEVA, Switzerland

Swiss bank UBS AG posted a fourth-quarter net profit of 1.29 billion Swiss francs (US$1.35 billion) yesterday, a result that missed analysts’ expectations but helped make for its first annual profit in four years.

The largest Swiss bank said that for the first time since the global financial crisis, it had a net annual profit, of 7.2 billion Swiss francs (US$7.5 billion). That made 2010 the first profitable year for UBS since 2006, when the bank had an annual net profit of 12.6 billion Swiss francs.

UBS said it benefited from income gains at its securities unit and its private bank, and that it had turned around the outflows it had suffered from wealthy client deposits.

The Zurich-based bank suggested it was regaining trust from those clients, saying inflows at its private bank rose to 2.7 billion Swiss francs (US$2.84 billion), up from 900 million francs.

In 2009, the bank had a net loss of 2.74 billion Swiss francs.

But the latest fourth quarter results were only a modest improvement on last year, when the bank reported a net profit of 1.205 billion francs for the fourth quarter, and missed analysts’ forecasts who had expected net profits of up to 1.45 billion Swiss francs in the fourth quarter.

“While we made substantial progress in 2010, we are fully aware that we have to continue to improve our results,” UBS Chief Executive Oswald Gruebel said in a statement.

The bank’s fourth-quarter results benefited from a one-off tax credit of 149 million Swiss francs.

But that was significantly less than the one-off tax credit of 825 million Swiss francs that helped UBS beat expectations in the third quarter, when it reported a net profit of 1.664 billion Swiss francs.

The bank said it would continue this year to retain earnings to meet capital requirements and was confident that activity among its wealthy clients would pick up this quarter.

UBS said will not pay a dividend to its shareholders this year and will instead store up the profit to meet stricter Swiss banking rules and new international banking standards requiring higher stores of capital.

It said it had cut its bonus pool by 10 per cent, down to US$4.3 billion Swiss francs — which is US$500 million Swiss francs less than in 2009.

Those figures reflect the bank’s attempt to appease Swiss government, which kept the bank going two years ago, but retain talented staff. The head of the bank’s compensation committee, UBS board member Sally Bott, stepped down Monday.

UBS said its fourth quarter profits before taxes rose to 1.161 billion Swiss francs, up from 818 million Swiss francs in the third quarter, which it said reflected more client activity across all businesses and included some credit losses and higher general and administrative expenses.

Analyst Tobias Brutsch at private bank Vontobel had said investors would be looking for details on the restructuring of UBS’s investment bank, which is still lagging behind the company’s overall recovery. He had said he expected net profits of 1.44 billion francs in the fourth quarter.

UBS shares closed at 17.50 Swiss francs Monday, for a market capitalization of US$70.1 billion.