Switzerland’s UBS AG said yesterday it had discovered unauthorized trading by a dealer in its investment bank had caused a loss of about US$2 billion.
“The matter is still being investigated, but UBS’ current estimate of the loss on the trades is in the range of US$2 billion,” the bank said in a brief statement just before the stock market opened. “It is possible that this could lead UBS to report a loss for the third quarter of 2011. No client positions were affected.”
UBS shares immediately tumbled 8 percent at the open and were trading down 5.8 percent at 10.30 Swiss francs at 9:14am, compared with a flat European banking sector index.
Photo: Reuters
LOSS OF CONFIDENCE
“It is amazing that this is still possible,” ZKB trading analyst Claude Zehnder said. “They obviously have a problem with risk management. Even when the amount isn’t so high, it is once more a loss of confidence that casts UBS in a poor light.”
“With this they are losing a lot of credit that they had regained with effort,” he added.
UBS had started to see client confidence return this year after it had to be rescued by the Swiss state in 2008 following massive losses on toxic assets held by its investment bank.
UBS announced last month it was to axe 3,500 jobs to shave SF2 billion (US$2.3 billion) off annual costs as it joins rival investment banks in reversing the post-crisis hiring binge and preparing for a tough few years.
Investment banks worldwide have been hit by slow trading because of the debt problems in the eurozone and the US, as well as regulations aimed at forcing banks to hold more capital to protect them from future shocks after the 2008 global financial crisis.
UBS expects to book a restructuring charge because of the job cuts of about SF550 million and about SF450 million will be booked in the second half of the year, with the majority recognized in the third quarter.
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