Michael Buholzer/ReutersThe Swiss bank UBS in Zurich.
LONDON – The Swiss bank UBS on Tuesday reported a large loss for the fourth quarter, driven by costs to settle legal matters, including its role in a global rate-manipulation scandal.
UBS booked a loss of 1.9 billion Swiss francs ($2 billion), a sharp drop compared with a profit of 323 million francs in the period a year earlier. The loss was slightly smaller than some analysts had predicted, and UBS said it planned to buy back 5 billion francs of its debt to reduce its financing costs.
“The bank’s performance reflects the effects of the challenging operating environment during the year, the costs involved in reshaping the business and the actions we took to address the challenges we faced,” the bank chairman, Axel Weber, and the chief executive, Sergio P. Ermotti, wrote in a letter to shareholders. “While progress was made on many issues during 2012, many of the underlying challenges remain at the start of the new year.”
Since taking the helm of UBS in 2011, Mr. Ermotti has been seeking to reduce costs by eliminating jobs, shrinking capital-intensive trading operations and repairing the bank’s reputation after a string of scandals.
In December, the bank agreed to pay $1.5 billion in fines for its role in a scheme that involved other banks and brokers to manipulate the London interbank offered rate, or Libor, and other benchmark interest rates. The settlement came after an earlier fine for charges it had helped some clients avoid United States taxes.
In October, UBS began eliminating about 10,000 jobs as it retreated from some business lines to focus more on its successful wealth management operation. Its investment banking operation was hurt in 2011 by a $2.3 billion trading scandal that cost the job of the chief executive at the time, Oswald Grübel.
The bank said on Tuesday that it “remains on track” with plans to reduce exposure to risky assets and cut costs. UBS said it had achieved 1.4 billion francs in net cost savings since the revamp started in mid-2011. As a result, it plans to increase its dividend payout for 2012 by 50 percent, to 0.15 francs a share.
UBS also announced it would change the way it pays bonuses to link them closer to the firm’s performance. Bankers would have to give up deferred compensation if the bank’s capital ratio fell under a certain level.
The investment banking unit had a pretax loss of 557 million francs in the last three months of 2012 compared with a profit of 114 million francs in the period a year earlier.
UBS’s wealth management unit reported that net new money inflows declined to 2.4 billion francs from 3.1 billion francs in the fourth quarter of 2011, after Western European clients withdrew funds amid the crisis in the euro zone.
Article source: http://dealbook.nytimes.com/2013/02/05/ubs-posts-2-billion-loss-on-libor-fines/?partner=rss&emc=rss
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