By Max Clarke

Fresh signs that the global economic recovery is underway came as Swiss banking giant, UBS (SIX:UBSN, NYSE:UBS) , posted a jump in profits for Q1 2011 to 2.2 billion CHF, up from 1.2 CHF for Q4 2010.

“I am satisfied with our result considering market activity during the first quarter, and I am particularly pleased by the increase in net new money, confirming the return of client trust and confidence,” commented CEO Oswald Grubel.

The rise in profits hides however, hides an underlying uncertainty in the global economic situation, and in the performance of UBS, as profits were down when compared to the same quarter 2010. Furthermore, the outlook for the coming year remains uncertain, due to fluctuations in currencies and oil prices driven by the ongoing situation in the Middle East.

The Basel, Switzerland, headquartered bank’s outlook statement paints a mixed future for the world’s 2nd largest private wealth manager:

In the second quarter we expect trading volumes in the equity markets to remain at or around the levels that obtained in the first quarter. This should support transaction-based income in our wealth management businesses and flow trading in the Investment Bank. Price volatility will also continue to present potentially attractive buying opportunities for our clients and investment managers.

Volatility in currency markets is likely to continue, driven by concerns about European sovereign debt and developments in the Middle East and Japan. Notwithstanding the emergence of inflation in a number of economies, we expect short-term interest rates in the West, and in particular in Switzerland, to remain low, continuing to constrain interest margins, particularly in our wealth management businesses and in our Swiss retail and corporate banking operations. Subject to market conditions, we expect to see some improvement in a number of our business lines in the Investment Bank, even taking into account the constraint imposed on some of our FICC businesses by our focus on controlling risk levels. The competition for talent in certain regions and recent base salary increases will put some pressure on our expense base. Nevertheless we remain confident that we can continue to build on the progress we have made.