"While equities put in a strong performance on the back of rising stock markets, heavy trading volumes and the positive effects of synergies, income from rates products (bonds and other interest rate instruments), which had risen strongly in the first half of 1997, declined by 38 per cent due to the need to consolidate trading positions," UBS said.

UBS was created from a merger of Union Bank of Switzerland and Swiss Bank Corp.

With assets totaling 1.084 trillion Swiss francs ($723.1billion), it is the largest banking group in Europe, and comprises the world's largest private banking operation.

Its first-half net profit rose five per cent to 3.02 billion.

That figure excluded sale of a Lugano-based private bank, BSI-Banca della Svizzera Italiana, and provisions for big Swiss banks' settlement with Holocaust victims.

UBS expected full-year 1998 net profits to rise some 10 per cent from last year's 4.8 billion Swiss francs, before restructuring provisions.

But it also said it expected financial results to slow in the second half compared with the first six months given the uncertain outlook for world financial markets and special factors.