ZURICH: UBS put aside 1.8 billion Swiss francs ($1.9bn) in the third quarter for potential legal costs and said it was talking to the US Department of Justice about resolving an investigation into currency market rigging.
The increase in legal reserves shows Switzerland’s largest bank is struggling to move on from past scandals, including a $1.5bn settlement for interest rate rigging and $885 million to settle claims that UBS defrauded two US government-controlled companies before the 2008 financial crisis.
“We all knew there would be bumps in the road and some of these challenges remain,” UBS Chief Executive Sergio Ermotti told investors on a call about third-quarter results.
Besides the legal setbacks, the bank’s earnings showed signs of health, especially at its flagship private banking division which caters for wealthy clients. It continued to bring in more money and increased profitability.
Authorities around the world are investigating allegations that traders at some major banks rigged the $5.3 trillion-a-day currency market, the world’s biggest but least regulated.
Zurich-based UBS did not link the extra legal reserves, which bring the amount put aside for future litigation to 3.469bn francs, to the foreign exchange investigations.
But UBS said for the first time it was talking to the US Department of Justice’s criminal and anti-trust divisions about how to resolve their investigation into currency rate rigging.
Despite the reserves, UBS beat forecasts for third-quarter net profit with a 32 per cent rise from last year, largely due to a 1.3bn-franc gain from how it accounts for past losses.
“All told, it will take UBS much longer and cost them much more to resolve their past, but at least the bank’s business is on track again,” said Dirk Becker, an analyst for Kepler Capital Markets who rates UBS as hold with a 17-franc target.
UBS shares climbed 4.7pc to 16.2 francs at 1023 GMT, the best performer in the European banking sector.
The bank is halfway through a three-year drive to focus on private banking, shrink its investment bank and abandon riskier activities such as bond trading.
Published in Dawn, October 29th , 2014
