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UBS Profit Misses Estimates on Litigation Provision

UBS AG (UBSN), Switzerland’s biggest bank,
posted a smaller-than-estimated benefit in third-quarter profit
after environment aside 1.84 billion Swiss francs ($1.94 billion)
for authorised costs as it prepares to settle probes into alleged
currency rigging.

Net income rose to 762 million francs in a entertain from
577 million francs a year earlier, a Zurich-based bank pronounced in
a matter today. That missed a 804 million-franc average
estimate of 7 analysts surveyed by Bloomberg. UBS requisitioned 1.3
billion francs in net taxation gains.

Most of a authorised supplies were for a bonds unit,
the bank pronounced but indicating to specific litigation. UBS
expects a financial attention to continue confronting “elevated”
costs for authorised and regulatory matters “for a foreseeable
future,” it pronounced today. Citigroup Inc. (C:US) analysts estimated this
month UBS might face fines of about $4.5 billion for foreign-exchange manipulation, out of a sum of as most as $41 billion
for all banks underneath investigation.

“We see lawsuit as a biggest regard in investors’
minds for UBS given of doubt around payout intensity for
the stock,” Kian Abouhossein and Amit Ranjan, analysts at
JPMorgan Chase Co., pronounced in a note progressing this month.

UBS fell 8.8 percent in Zurich trade this year, and
dropped 1 percent to tighten during 15.43 francs yesterday. The
decline this year exceeds a STOXX 600 Banks Index’s 2 percent
drop.

Litigation Costs

Analysts had estimated authorised supplies during 358 million
francs in a quarter, according to a normal of four
forecasts.

“We are actively addressing lawsuit and regulatory
matters,” Chief Executive Officer Sergio Ermotti pronounced in the
statement.

Authorities questioning purported plan of foreign-exchange markets have started allotment talks with UBS that may
involve “material financial penalties,” a bank pronounced last
month. It has paid about $3.6 billion in fines and settlements
since 2012.

The U.K.’s Financial Conduct Authority is in talks with banks
including UBS, JPMorgan, Citigroup and Barclays Plc to settle
investigations into currency-rigging allegations as shortly as next
month, people informed with a probes have said. UBS might be the
first bank to strech a allotment with a U.S. Department of
Justice in a review of a matter, a Financial Times
reported this month.

French Probe

UBS has pronounced it skeleton to compensate out some-more than 50 percent of
earnings as dividends to shareholders, supposing a common
equity ratio underneath a Basel III manners is during some-more than 13
percent and stays during some-more than 10 percent underneath inner stress
tests. The common equity ratio was 13.7 percent during a finish of
September, while a post-stress ratio stayed above 10 percent.

“Three years given introducing a strategy, a business
is distant stronger, a gain energy is most larger and our
absolute and relations collateral position speaks for itself,”
Ermotti said. “That gives us each certainty in a ability to
deliver on a collateral lapse policy.”

UBS is underneath review in France and Belgium for
allegedly assisting rich clients equivocate taxes. In a French
probe it paid a confidence deposition of 1.1 billion euros ($1.4
billion) during a finish of September. The excellent in a box could be
as high as 4.9 billion euros, a chairman informed with a matter
has said.

Wealth government pretax distinction rose 27 percent to 707
million francs, violence analysts’ guess of 641 million
francs. Earnings during resources government Americas rose 17 percent
to 236 million francs. The units combined 9.8 billion francs and
$4.9 billion in net new money, respectively.

Cost Savings

The investment bank posted a pretax detriment of 1.28 billion
francs compared with a distinction of 251 million francs a year
earlier after engagement 1.69 billion francs in litigation
provisions.

Earnings in item government rose 31 percent to 154 million
francs, while a sell and corporate section posted a 6 percent
increase in income to 426 million francs.

UBS also pronounced it expects restructuring charges to volume to
about 1.5 billion francs in 2015, about 1 billion francs in 2016
and about 500 million francs in 2017 as it continues to target
2.1 billion francs in net annual cost savings.

To hit a reporters on this story:
Elena Logutenkova in Zurich at
[email protected];
Jeffrey Vögeli in Zurich at
[email protected]

To hit a editors obliged for this story:
Elisa Martinuzzi at
[email protected]

Article source: http://www.businessweek.com/news/2014-10-28/ubs-profit-misses-estimates-on-litigation-provision

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