UBS (NYSE: UBS - News) on Thursday prepared investors for "another difficult year" as the biggest European casualty of the meltdown in US subprime securities confirmed that losses in fixed income trading had heavily outweighed another successful year in private banking.

The Swiss bank's full-year results confirmed the profits warning issued late last month. UBS said it lost SFr4.38bn ($3.95bn, €2.71bn) last year, and SFr12.45bn in the fourth quarter, when it booked the bulk of writedowns on its US mortgage related positions. The figures compared with net group profits of SFr12.26bn in 2006, and SFr3.41bn for the closing three months.

The group declined to give a clear outlook, pending clarification at a news conference later on Thursday. But it highlighted weaker financial markets and deteriorating economic data, "especially, but not only" in the US. While interest rate cuts would eventually bite, "it is uncertain when this will be", the bank said

UBS said it had already taken action to curb risk in fixed income trading, the source of its US subprime problems, improve controls and focus trading on business for clients, rather than its own book. Action was also being taken to reprice the cheap funding that had prompted traders to take big positions in US subprime paper.

The bank also warned of further job losses as its fixed income division withdrew from the "selected proprietary credit business in the US, Asia and Europe." However, it gave no details about additional cuts beyond the 1,500 jobs it had said would be removed when the scale of its problems began to emerge late last year.

"Last year was one of the most difficult in our history... While most of our businesses continued to be very profitable, the sudden and serious deterioration in the US housing market, in combination with our large exposure in subprime mortgage related securities and derivatives, has driven us into loss for the year", noted Marcel Rohner, chief executive.

The scale of the problems was spotlighted at the investment bank, which posted a pre-tax loss of SFr15.23bn last year, compared with pre-tax profits of SFr5.94bn the previous year.

While the overwhelming bulk of the problems lay in subprime, the group's equities and investment banking operations continued to perform successfully.

Private banking continued to do well. Pre-tax earnings in the division, which comprises global wealth management and business and retail banking in Switzerland, rose to SFr9.48bn from SFr8.14bn the previous year, while pre-tax profits in the fourth quarter hit a record SFr2.51bn.

Net new money appeared to remain strong, with inflows of SFr156bn last year, up 37 per cent on 2006. But the SFr31.7bn booked in the final quarter was only marginally up on the SFr30bn figure for October and November. While December is a traditionally weak month, the marginal increase could point to withdrawals as private clients grew uneasy about the bank's problems and succumbed to attempts by rivals to exploit its difficulties.