Six months after Merrill Lynch veteran Bob McCann came on board to revive the U.S. wealth management business of UBS, the Swiss bank's investors were reminded that a full recovery is still a ways away.

UBS issued some welcome earnings news Monday, pre-announcing its highest quarterly profit since the credit crisis began, but the bank also revealed that its wealth and asset management businesses continue to bleed assets.

Separately, the U.S. Justice Department said an American client of UBS, Harry Abrahamsen, pleaded guilty on Monday to failing to file tax forms for income diverted to offshore Swiss accounts valued at $1.3 million.

Rochdale Securities' Richard Bove, among the very few U.S. sell-side analysts who cover UBS shares, said the persisting loss of assets shows that any revival will be driven by investment banking and not by what McCann does.

Wealth management is not going to come charging back, he said. I wouldn't buy or sell the stock based on what they do in the U.S. wealth management business.

Bove on Monday raised his investment rating on UBS to buy and expects earnings to be higher than estimated, assuming UBS traders can generate $1.5 billion of revenue per quarter.

Before ill-timed bets on subprime mortgage led to staggering losses over the past two years, UBS reported $3 billion a quarter from trading, he said.

UBS officials did not respond to requests for comment.

The Swiss bank said on Monday it expects to report pretax profit of at least 2.5 billion Swiss francs ($2.3 billion), nearly three times higher than the previous quarter.

UBS Wealth Management Americas suffered 7 billion Swiss francs of net withdrawals. That is a little less than 1 percent of the unit's total assets at the end of December and down from the 11 billion francs of withdrawals in the fourth quarter and 8.6 billion francs of outflows in the third quarter.

Overall, UBS client withdrawals narrowed to 15 billion francs, or one-third of the 56 billion francs that flowed out in the fourth quarter.

UBS shares rose 72 cents, or 4.4 percent, to $17.24 in New York Stock Exchange trading, a five-month high.

The Abrahamsen case is the most recent of a slew of actions the U.S. government brought against former UBS clients it accused of stashing assets abroad to avoid U.S. taxes.

Last year UBS admitted it helped U.S. clients evade taxes, and paid $780 million to settle a government lawsuit. As part of that deal, UBS handed over details on more than 250 accounts, spooking the bank's clients both in and outside the United States.

(Additional reporting by Lisa Jucca and Kim Dixon; Editing by Steve Orlofsky)

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