Swiss banking giant UBS reported that net profit slid by 54 percent to 827 million Swiss francs (688 million euros, $910 million) in the first quarter of 2012, significantly below expectations, in a statement on Wednesday.
The company was in particular hit by an exceptional charge of 1.2 billion francs for bad debt, it said in a statement.
In February UBS had forecast a tough first quarter owing to the economic crisis when it posted its results for 2011, with net profit sliding 44 percent year in the year to 4.2 billion francs.
"Given challenging market conditions, I am proud of what our employees have achieved, delivering high-quality results while deploying less risk and successfully executing our strategy," chief executive Sergio Ermotti said in the statement.
The result came in 25 percent lower than the average forecast of 1.1 billion francs by analysts polled by financial firm AWP.
UBS highlighted good performance in its core division, wealth management, which registered pre-tax profit of 803 million francs in the first three months of the year, up 70 percent from the last three months of 2011.
The wealth management Americas division reported its highest pre-tax profit ever at $209 million (157.8 million euros), up more than 30 percent from the figure for the previous quarter.
The bank said the two divisions were boosted by inflows from the Asia-Pacific region, emerging markets and Switzerland.
UBS sounded a cautionary note on its financial outlook, underlining that banks still face a tough environment because of the eurozone debt crisis, concerns about the European banking system, budget deficit battles in the United States and overall uncertainty about the global economy.
"Failure to make progress on these key issues would make further improvements in prevailing market conditions unlikely and would have the potential to continue the headwinds for revenue growth, net interest margins and net new money," it said.