* UBS Q1 profit dips less than "feared" - Citi
* CEO says bank needs market normalisation to hit goals
* Pickup in March and April should support revenue growth (Recasts with executive comments, market reaction)
By Brenna Hughes Neghaiwi
ZURICH, April 25 (Reuters) - Switzerland's biggest bank UBS is counting on a pick-up in market conditions to meet its 2019 targets, after investment bank earnings plunged 64 percent in the first quarter.
UBS reported a 27 percent drop in net profit on Thursday, although this was not as weak as expected after the fall in investment banking revenues was less than forecast and the bank benefited from some back-office accounting gains.
UBS executives said it would be a "steep climb" for the bank to hit 2019 profit targets, adding that the first benchmark would be to match 2018 returns, which were below the 2019 goals.
The bank is now looking to cost cuts and a rebound in markets that it said were showing early signs of recovery.
"We just need a normalisation of the markets," Ermotti said in a call with analysts.
"If the (macroeconomic) factors don't play out in the time that we were anticipating or was forecast to happen, of course, we may not be able to fully achieve those targets," he said.
The bank has seen some pickup in client activity over March and April and expects more optimistic sentiment and an increase in assets invested with the bank's wealth management to help boost revenues.
It also offered a sweetener to investors, confirming its capital returns policy and saying it would resume in the second quarter a 2019 share buyback programme of up to $1 billion.
Shares rose 1.1 percent by 0835 GMT.
"These results are better than feared," Citi analysts said in a note. But they added that UBS' goal to hit a roughly 15 percent return on CET1 capital in 2019 -- compared to 13.3 percent in the first three months -- looked difficult.
"Nonetheless these results are likely to be met with some relief and the resumption of buybacks is reassuring."
In March, Ermotti had flagged that revenues were down by about a third in its investment bank and down 9 percent in wealth management, describing conditions as among the toughest in years for investment banks.
Profits at its flagship wealth management business and investment bank were hit as trading slipped and clients stockpiled cash, falling 21 percent and 64 percent on an adjusted basis, respectively.
Ermotti described clients' cash holdings as "astonishing," adding they had hit 35 percent globally.
A 22 percent fall in equities revenues in its investment bank, driven by lower client activity in derivatives in particular, put the Swiss lender in line with U.S. peers but behind Swiss rival Credit Suisse, which on Wednesday reported a surprise earnings boost and gains in equities trading.
UBS posted a 9 percent gain in foreign exchanges, rates and credit revenues.
Executives declined to comment on a potential tie-up between Deutsche Bank's DWS and UBS's own asset management unit, which recorded a 2 percent profit gain thanks to cost cuts.
But they said the bank took a pragmatic approach towards merger and acquisitions that were focused on creating value for shareholders.
Reporting by Brenna Hughes Neghaiwi Editing by Michael Shields and Edmund Blair