UBS announces US$2.7 billion net loss

NOT ALL BAD NEWS::Despite the loss, UBS said it had made progress in reducing its higher-risk investment banking operations in favor of wealth management

AFP and Reuters, ZURICH and LONDON

Wed, Feb 06, 2013 - Page 15

Swiss banking giant UBS yesterday announced a net loss of 2.5 billion Swiss francs (US$2.7 billion) as fines from the Libor rate-fixing scandal weighed on results.

In the final quarter of last year UBS suffered a net loss of SF1.8 billion when it booked provisions for the combined fines of SF1.4 billion from regulators as well as restructuring costs.

The full-year net loss was higher than expectations, with analysts surveyed by the Swiss financial news agency AWP foreseeing on average UBS to turn in a loss of SF2.2 million.

UBS had earned a net profit of SF4.1 billion in 2011.

Despite last year’s loss UBS said it had made progress in executing its strategy to reduce its higher-risk investment banking operations in favor of wealth management, and would recommend increasing its dividend by 50 percent to SF0.15 francs per share.

In the fourth quarter of last year, UBS’ investment banking unit suffered a pre-tax net loss of SF557 million, down from a loss of 2.8 billion francs in the previous quarter.

The wealth management unit posted a pre-tax profit of 398 million francs in the fourth quarter, down from 582 million francs in the third quarter.

FUNDING COSTS

UBS also announced it would buy back SF5 billion worth of its bonds, which it said would lower its future funding costs and further improve its capital ratios.

“While progress was made on many issues during 2012, many of the underlying challenges remain at the start of the new year,” UBS said.

“Failure to achieve further sustained and credible improvements to the eurozone sovereign debt situation, European banking system issues, unresolved US fiscal issues, ongoing geopolitical risks and the outlook for growth in the global economy would continue to exert a strong influence on client confidence and, thus, activity levels in the first quarter of 2013,” the bank said.

Meanwhile, British bank Barclays has stockpiled more cash to cover a growing compensation bill for mis-selling interest rate hedging products (IRHP) and payment protection insurance (PPI), it said yesterday.

Following a review, Barclays said it would include a provision of £850 million (US$1.3 billion) for IRHP, an increase of £400 million, in full-year results on Feb. 12.

The provision for PPI will now reach £2.6 billion, an increase of £600 million.

COLLECTIVE BILL

Several British lenders face a collective bill of around £12 billion for mis-selling loan insurance designed to protect borrowers who missed repayments due to illness or redundancy.

Barclays’ announcement came hours before new chief executive Antony Jenkins and chairman David Walker appear before UK lawmakers to testify to a banking inquiry into industry standards, which was launched after Barclays was fined US$450 million last June for rigging Libor interest rates.

Last month, the head of Britain’s Financial Ombudsman Service, Natalie Ceeney, said banks only had themselves to blame for the spiralling costs of the scandal, which she said could have been contained if they had addressed the issue earlier.

The ombudsman service, which steps in when banks and their customers cannot reach an agreement on compensation, said it was receiving up to 10,000 complaints each week about PPI and has hired 1,000 new staff to cope with the caseload.