* UBS posts 1.5 bln Sfr Q1 net profit
* Investment bank gains against market losses
* Shares fall on wealth management miss (Recasts with comments from UBS executives, trader, adds share price)
By Brenna Hughes Neghaiwi
ZURICH, April 23 (Reuters) - Swiss bank UBS disappointed investors on Monday with first-quarter results that revealed strong earnings at its investment bank, while its flagship wealth management business missed forecasts.
Switzerland's largest bank reported a 19 percent rise in first-quarter net profit as its investment bank navigated turbulent markets more effectively than rivals.
But UBS over the last decade has scaled back its capital-intensive investment bank to focus more on the lucrative business of banking the world's rich, becoming the world's largest wealth manager. Cross-town rival Credit Suisse, which reports figures on Wednesday, is currently going through a similar transformation.
UBS's wealth business, which was merged into one global division this year, netted 19 billion francs in new money but fell short of expectations with pre-tax operating income of 1.13 billion francs.
Wealth management contributes more than half of UBS's operating income, compared with less than a third contributed by the investment bank.
Wealth management's disappointing performance, plus its higher costs and UBS's cautious outlook, put pressure on the bank's shares which fell as much as 4 percent.
"The quarter turned out to be a tale of two halves, with an exuberant start in January that went well beyond typical seasonality, followed by a more muted finish," Chief Executive Sergio Ermotti told analysts and reporters on a call.
Many investment banks took a hit during the first months of 2018 as a surge in volatility -- while keeping traders busy --saw deals taken off the table and firms back away from planned market entries for fear of netting less than hoped.
UBS bucked the trend by earning more money from helping corporate clients arrange deals, particularly in Asia. It offset a drop in revenues from advising companies on stock market listings through a rise in private transactions. As a result, the investment bank's pre-tax earnings jumped 23 percent.
But the bank warned protectionism and international political tensions were putting a damper on investor confidence.
"After the spike in volatility, naturally we saw our clients become a bit more defensive," Chief Financial Officer Kirt Gardner said. "Their optimism was dented a bit, and that carries into the second quarter."
The bank flagged a fall in transaction activity for both its investment bank and wealth management divisions.
"The earnings quality was worse than expected," one trader said. "UBS wants to set the standard in wealth management and precisely there it hasn't gone as well as they'd like. Instead, they've recorded a win for the volatile investment bank, which they actually want to reduce."
($1 = 0.9753 Swiss francs)
Reporting by Brenna Hughes Neghaiwi; Editing by John Miller, Stephen Coates and Jane Merriman