Nov. 5 (Bloomberg) -- UBS AG, the Swiss bank that posted a fourth straight quarterly loss this week, ranks lowest among Europe’s largest lenders in the estimation of industry analysts.

Among the 39 who issued a recommendation on UBS over the past three months, 31 percent counseled investors to buy the Zurich-based bank’s shares, the least among Europe’s 10 biggest banks by market value, data compiled by Bloomberg show. Forty- six percent said hold and 23 percent said sell.

UBS remains unpopular relative to peers even after getting rid of most of its toxic assets, settling a U.S. lawsuit related to tax evasion and boosting capital to convince the Swiss government to sell its stake. Withdrawals by wealthy clients at UBS accelerated in the third quarter, bringing redemptions to 182.9 billion francs ($180 billion) over the past 18 months and undermining profit at the bank’s biggest division.

“Of course UBS has done a lot, but outflows at the private bank continue,” said Patrick Lemmens, who helps manage about $14 billion at Robeco Group in Rotterdam, including UBS shares. “I don’t think a restructuring story on its own is enough. UBS is going to be range-bound” until outflows reverse.

UBS’s 15 percent advance in Swiss trading this year trails all its biggest competitors except Milan-based Intesa Sanpaolo SpA. The 63-company Bloomberg Europe Banks and Financial Services Index gained 41 percent in 2009 and Credit Suisse Group AG, the No. 2 Swiss bank, climbed 94 percent.

‘Glorious Past’

Even so, UBS is no bargain, analysts said. The bank trades at 14.5 times estimated earnings, the third-highest price-to- earnings ratio among the largest banks after London-based HSBC Holdings Plc and UniCredit SpA of Milan, Bloomberg data show. UBS boosted the number of its shares by 98 percent since the end of 2007 through four capital increases. Credit Suisse’s outstanding shares rose 15 percent.

“The bank can still claim to have a huge level of assets under management,” Elie Darwish, a Paris-based analyst at Exane BNP Paribas with a “neutral” rating on UBS, said in a note yesterday. “But this is as much a strength as a legacy of its glorious past. With these days gone, the bank must now deliver a turnaround.”

A UBS spokeswoman declined to comment.

Investors at UBS’s wealth management units withdrew a net 26.6 billion francs in the third quarter, up from 22.3 billion francs in the second, the bank reported on Nov. 3. The world’s second-largest private bank may face outflows until 2011, analysts including Morgan Stanley’s Huw van Steenis said.

‘Pressure Mounting’

Chief Executive Officer Oswald Gruebel and Chairman Kaspar Villiger, who both joined UBS this year, said in a letter to shareholders that they don’t expect “an immediate recovery” in client inflows. Redemptions may persist at least until UBS returns to profitability and stops losing client advisers, Chief Financial Officer John Cryan told investors after reporting a third-quarter net loss of 564 million francs this week.

UBS amassed the biggest writedowns and losses from the credit crisis among European competitors, and had to turn to the Swiss government a year ago for a 6 billion-franc capital injection to help it spin off risky assets into a Swiss National Bank fund. The bank reported a net loss of 21.3 billion francs last year, a record in Swiss corporate history.

“The pressure is now mounting to demonstrate that the group is turning around, specifically with respect to the private banking franchise,” JPMorgan Chase & Co. analysts led by Kian Abouhossein said in a note yesterday. They have a “neutral” rating on UBS.

Shrinking Margins

UBS is not only seeing clients withdraw funds from its wealth management unit, the bank is also earning less on the remaining 1.68 trillion francs of assets under management, the earnings release showed.

“The dash-to-cash hit UBS’s margins harder than any other private banking division we cover,” van Steenis, a London-based analyst at Morgan Stanley with an “equal-weight” rating on UBS, said in a note yesterday.

The gross margin on business with international clients, which shows how much revenue the bank makes compared with assets under management, fell to 83 basis points in the third quarter from 102 basis points two years ago. A basis point is a hundredth of a percentage point.

“We consider the wealth management business to be facing significant challenges,” Dirk Hoffmann-Becking, a London-based analyst at Sanford C. Bernstein, who has an “underperform” rating on UBS, said in a note after earnings.

The following is a table of the 10 largest European banks by market value, with the percentage of buy ratings, their price-to-earnings ratios, and year-to-date stock performance, as of the close of trading on Nov. 4.

Bank         Market Cap     Buy Ratings    P/E Est   Stock Rise
             (USD bln)       (3 months)             (yr to date)

HSBC          195.25          36.67%       19.69       17.35%
Santander     133.75          72.73%       10.21       62.22%
BNP Paribas    92.51          70.97%       10.80       79.01%
BBVA           66.59          54.55%        9.22       38.22%
Credit Suisse  64.53          63.89%        9.15       94.39%
Barclays       63.71          66.67%       11.17      119.69%
UBS            59.48          30.77%       14.51       14.62%
UniCredit      58.79          43.59%       15.49       59.91%
Intesa         52.53          43.75%       12.78       10.94%
Standard       51.75          32.00%       14.07       76.57%
Chartered

To contact the reporters on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net

Last Updated: November 4, 2009 18:00 EST