swiss bank

DealBook: UBS Profit Falls on Facebook Loss

July 31, 2012 by NewsMaker Leave a Comment

Arnd Wiegmann/ReutersSergio P. Ermotti, right, chief of UBS, and Thomas C. Naratil, the Swiss bank’s chief financial officer.

LONDON — UBS reported on Tuesday a 58 percent decline in its net profit in the second quarter as a fall in investment banking income weighed on the Swiss bank.

The drop in profit comes as the chief executive of UBS, Sergio P. Ermotti, is paring back the firm’s investment banking unit and expanding its wealth-management division.

Market volatility connected to the European debt crisis has hit trading activity across the financial services sector.

Like many of its rival, UBS’s investment banking unit continued to face difficult market conditions, and was also hit by a 349 million Swiss franc, or $356 million, loss connected to the botched Facebook initial public offering.

The bank said the lack of a solution to the European debt crisis and the Continent’s banking problems could harm the firm’s future profits.

“Failure to make progress on these key issues, accentuated by the reduction in market activity levels typically seen in the third quarter, would make further improvements in prevailing market conditions unlikely,” UBS said in a statement.

Net income at the Swiss bank, which was below analysts’ estimates, fell to 425 million Swiss francs during the three months through June 30, compared with 1.02 billion Swiss francs in the same period a year earlier. Operating income fell 10.6 percent, to 6.4 billion Swiss francs.

In early morning trading in Zurich, UBS shares fell 4.9 percent. Stock in the bank has dropped around 8 percent over the last 12 months.

Lower trading revenue and the loss incurred from the Facebook I.P.O. hurt UBS’s investment banking unit. In total, the division reported a pretax loss of 130 million Swiss francs in the second quarter. UBS does not provide net income figures for its separate business units.

Technical errors at Nasdaq exchange caused a delay in the start of trading of Facebook shares and later flooded the market with the social networking company’s stock. The problems caused UBS to receive more shares than its clients had ordered, according to a company statement.

“We will take appropriate legal action against Nasdaq to address its gross mishandling of the offering and its substantial failures to perform its duties,” the bank said.

Despite the declining activity in its investment banking unit, UBS said its wealth-management businesses had received 13.2 billion Swiss francs of new money during the second quarter of the year.

UBS continues to reduce its exposure to risky assets after a string of recent scandals, including a $2.3 billion trading loss prosecutors say was caused by Kweku M. Adoboli, a former trader at the bank.

The Swiss financial giant said it had cut its risk-weighted assets by 45 billion Swiss francs in the second quarter. The bank now plans to reduce the total figure to 270 billion Swiss francs by 2013, more than the previous target of 290 billion Swiss francs.

UBS said its core Tier 1 capital ratio, a measure of a firm’s ability to weather financial shocks, had risen to 8.8 percent, and would reach 9 percent by the end of the year.

The firm also cut more than 700 jobs during the three months through June 30, as part of the bank’s plan to achieve annual savings worth 2 billion Swiss francs by 2013. Last year, the Swiss firm said it would cut 3,500 jobs, with about half of the layoffs to come from its investment banking division.

UBS is also subject to several investigations into the manipulation of the London interbank offered rate, or Libor. Mr. Ermotti of UBS said the bank was in the process of conducting an internal review related to Libor and other benchmark rates. The British bank Barclays agreed a $450 million settlement last month with American and British authorities after some of its traders and senior executives were found to have altered the rate for financial gain.

In a conference call with reporters, Tom Naratil, the bank’s chief financial officer, declined to comment on whether UBS had made specific provisions to cover potential fines connected to the manipulation of the rate. The Swiss bank, however, set aside a further 130 million Swiss francs during the second quarter to cover litigation and regulatory issues, but did not say if the extra money was related to Libor.

“We have provisioned accordingly for all matters,” Mr. Naratil said.

Article source: http://dealbook.nytimes.com/2012/07/31/ubs-profit-hit-after-loss-on-facebook-ipo/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: business units, management division, swiss bank

DealBook: U.S. Charges 3 Swiss Bank Employees With Aiding Tax Evasion

January 4, 2012 by NewsMaker Leave a Comment

Wegelin Company, the oldest Swiss bank, confirmed on Wednesday that three of its employees had been indicted by prosecutors in New York for helping United States taxpayers to hide more than $1.2 billion from the Internal Revenue Service.

The bank “acknowledges the U.S. justice authorities’ decision to press charges against three of its employees,” the company said in a statement. It said “the employees concerned have taken on other tasks within the bank,” adding that all dealings with American clients had been ended.

On Tuesday, the United States attorney for the Southern District of New York, Preet Bharara, announced the indictment of three men “who sought to to capture business lost by UBS and another large international Swiss bank” after the I.R.S.’s pursuit of the banks became public in 2008.

Prosecutors said that the three employees had told American clients not to worry about the I.R.S. because their bank “had a long tradition of bank secrecy,” adding that they had advised “their U.S. taxpayer-clients that the bank was less vulnerable to United States law enforcement pressure because, unlike UBS, the bank did not have offices outside Switzerland.”

Senior managers of the bank, which is based in Saint Gallen, “participated in some of these sales pitches to U.S. taxpayer-clients who were fleeing UBS,” prosecutors said.

The bank did not address the substance of the indictment in its statement. Albena Björck, a spokeswoman for the bank, did not immediately respond to a request for comment.

“Wegelin Company remains committed to assisting in the clarification of matters regarding former U.S. clients and has authorized its lawyers in the United States to negotiate with the U.S. justice authorities to the extent possible under Swiss law,” its statement said.

The three, identified by prosecutors as Michael Berlinka, 41, Urs Frei, 51, and Roger Keller, 47, are accused of helping to set up dozens of secret accounts at “Swiss Bank A,” where they worked in Zurich as advisers, as well as helping clients to ‘‘to hide from the I.R.S. both the existence of certain Swiss bank accounts, as well as the income they generated.” Prosecutors did not identify Wegelin by name.

If convicted, the three men, who live in Switzerland, face maximum prison terms of five years each, and fines of up to $250,000, prosecutors said.

UBS, the biggest Swiss bank, paid $780 million and turned over details about thousands of client accounts to end prosecution. Both UBS and the other ‘”large Swiss bank’” had stopped helping American taxpayers avoid taxes after authorities turned up the heat, the prosecutors noted.

The United States has been waging a concerted battle to rein in tax evasion through Switzerland, the world capital of offshore accounts because of its tradition of banking secrecy. Officials in Washington are pursuing criminal charges against 11 Swiss institutions in an effort to bring about a comprehensive agreement to ensure Americans cannot hide money in Swiss banks.

Article source: http://feeds.nytimes.com/click.phdo?i=374009e68749e39e859429b9cd3124df

Filed Under: Business News Tagged With: prosecutors, saint gallen, swiss bank

DealBook: UBS Outlines How It Plans to Carry Out Turnaround

November 18, 2011 by NewsMaker Leave a Comment

Stefano Rellandini/ReutersSergio P. Ermotti joined UBS in April from the Italian bank UniCredit.

When Sergio P. Ermotti entered the chandelier-drenched ballroom at the Waldorf Astoria hotel in Manhattan for his first investor day at UBS as chief executive, he started choking on a piece of food, prompting a few attendees to joke that he may have bitten off more than he can chew in taking the top spot at the beleaguered Swiss bank.

As he took to the stage, a more composed Mr. Ermotti outlined the much-anticipated turnaround strategy for the firm, which in recent months has weathered the European debt crisis, global market turmoil and a trading scandal that prompted the resignation of his predecessor and dented employee morale.

In his speech on Thursday, Mr. Ermotti, 51, promised to shrink weak business units and to continue bolstering the bank’s capital levels. He is also aiming to increase the firm’s return on equity — a main measure of profitability — by several percentage points.

“We know these goals are ambitious, but we think they are achievable,” he told the crowded room made up of largely analysts and reporters. “Everyone will judge the success of our strategy by our ability to execute.”

UBS has endured a turbulent few years.

After becoming Europe’s biggest banking casualty during the subprime drama, UBS had to be bailed out by the Swiss National Bank in 2008. The financial firm had slowly started to restore credibility and profits when the sovereign debt crisis hit, hurting business and prompting layoffs.

Then in September, a rogue trading scandal cost the firm more than $2 billion and raised serious questions about its internal risk controls. In the wake of the scandal, Oswald J. Grübel, the chief executive who was expected to revive UBS with a plan for a slimmer but more profitable bank, resigned. Kweku M. Adoboli, the former trader who has been charged with fraud and false accounting for the trades, has yet to enter a plea and faces a court hearing in London next week.

Now it is up to Mr. Ermotti, who joined UBS in April and was named chief executive on Tuesday, to convince clients and employees that the difficult times are behind.

While Mr. Ermotti declined to comment on the trading scandal at the event, he and other senior executives promised a return to the basics. They outlined plans to exit risky businesses like equity proprietary trading, where the firm makes bets with its own capital. It is also in the process of scaling back the investment bank.

Instead, the bank will focus on areas like leveraged finance and corporate lending that offer the potential for good returns with less risk. Mr. Ermotti singled out the firm’s wealth management division, telling investors it was not for sale.

The bank will also continue to cut the work force. In August it announced plans to cut 3,500 jobs and said Thursday it would eliminate 400 more positions in the months to come.

But some analysts said Mr. Ermotti, who cut his teeth on Wall Street working at Merrill Lynch, faced a daunting challenge in revamping UBS at a time when the industry was streamlining and coping with stricter capital rules. Credit Suisse, a rival whose investment banking unit has been performing better, has laid out a similar strategy to UBS, raising doubts about how the banks will be able to share the shrinking demand for services and products.

Some analysts have urged more radical options for UBS. Kian Abouhossein at JPMorgan Chase wrote this month that UBS and Credit Suisse could combine their investment banking operations, a step that could create a top-five player by revenue.

On Wednesday, a former UBS chairman, Peter Kurer, who left the bank in 2009, suggested that UBS and Credit Suisse should split their investment banking businesses from the rest of the banks to satisfy shareholders.

“There are few who believe in a great future for investment banks; hardly anyone thinks that Swiss universal banks are good at running integrated investment banks,” Mr. Kurer wrote in a commentary for Bloomberg News on Wednesday.

Article source: http://dealbook.nytimes.com/2011/11/17/ermotti-outlines-turnaround-strategy-to-ubs-investors/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: investor day, return on equity, swiss bank

DealBook: UBS Names Sergio Ermotti as Chief Executive

November 15, 2011 by NewsMaker Leave a Comment

Stefano Rellandini/ReutersSergio P. Ermotti joined UBS in April from the Italian bank UniCredit.

7:55 a.m. | Updated

LONDON – UBS said on Tuesday that Sergio P. Ermotti, who has run the Swiss bank on an interim basis since September, would become permanent chief executive and take the reins of a strategic restructuring.

Axel A. Weber, a former chief of the German central bank, will take over as chairman next year, a year earlier than planned, UBS said. The bank accelerated the leadership change to speed up implementation of a new investment banking strategy, which UBS is expected to present to investors on Thursday in New York.

“The bank has a lot of restructuring to do and as interim C.E.O. with a chairman on his way out there’s little you can actually do,” said Florian Esterer, a fund manager at Swisscanto Asset Management. “This way UBS can slowly start moving forward.”

Mr. Ermotti, a Swiss national, joined UBS as management board member responsible for Europe in April and was widely seen as a potential successor to the former chief executive, Oswald J. Grübel. Mr. Ermotti stepped into that role on an interim basis when Mr. Grübel resigned after the bank lost $2.3 billion in a rogue trading scandal at its London investment banking division.

The changes “will bring essential stability and clarity to UBS,” Kaspar Villiger, the current chairman, said in a statement. “It will enable the bank to master the many current economic challenges and regulatory changes facing it.” He said the decision to make Mr. Ermotti the permanent chief came after UBS “carried out an intensive evaluation of external and internal candidates.”

Some analysts expressed doubts that UBS could find an outside candidate willing to take on the challenges at the bank, which is facing large job and cost cuts and needs to restore investor confidence after the trading loss.

UBS shares fell 2.9 percent in Zurich trading on Tuesday.

In his first internal note to employees as chief executive, obtained by DealBook, Mr. Ermotti warned that the UBS culture must ensure events like the trading loss do not happen again.

“I want to make clear that no one’s personal interest nor any amount of revenue is worth more than the bank’s reputation,” he wrote in the note.

A former UBS trader, Kweku M. Adoboli, is scheduled to appear in a London court next week to face charges of fraud and false accounting. He has yet to enter a plea.

UBS said a new strategy, which is expected to include a smaller and less expensive investment banking operation and a greater focus on the more successful wealth management business, had been approved by the board.

The strategy was developed by Mr. Grübel and Carsten Kengeter, head of the investment banking unit, to help UBS remain profitable despite tougher capital requirements and uncertain financial markets. It is now Mr. Ermotti’s responsibility to put the plan into action, and he told employees on Tuesday that he “will not rest until we succeed.”

“I will execute our strategy, which plays to our many strengths,” Mr. Ermotti said in a statement. “This strategy will be centered on our leading wealth management businesses and our position as the strongest universal bank in Switzerland. A focused, less complex and less capital-intensive investment bank and our asset management business are also key elements for growing our wealth management franchise.”

Mr. Ermotti, 51, joined UBS in April from the Italian bank UniCredit, where he was deputy chief executive. He previously worked at Merrill Lynch, where he was a co-head of global equity markets. He started at the firm’s equity derivatives and capital markets divisions in 1987.

Mr. Weber’s appointment as chairman is subject to his election by shareholders at the annual meeting scheduled for May 3. Mr. Villiger, the current chairman, would not be a candidate for election at the meeting.

“I am proud of what we have achieved during a very difficult time in our bank’s history,” Mr. Villiger said.

Mr. Weber said he would head to Switzerland in February to oversee the handover. He also said he knew Mr. Ermotti personally from his time at the German central bank and that the two men had spoken often over the last few weeks.

Article source: http://feeds.nytimes.com/click.phdo?i=402ca799f9d93d417ae9e0e57278bec6

Filed Under: Business News Tagged With: investment banking, italian bank, swiss bank

DealBook: 2 More UBS Executives Quit Over Trading Loss

October 5, 2011 by NewsMaker Leave a Comment

Sang Tan/Associated PressKweku M. Adoboli, the former UBS trader accused of costing the bank $2.3 billion in losses, at the City of London Magistrates Court last month.

LONDON — UBS, the Swiss bank, said Wednesday that its co-heads of global equities had resigned over last month’s trading incident that resulted in a $2.3 billion loss.

Francois Gouws and Yassine Bouhara handed in their resignations because they took responsibility for the management of the equities operation, which is where the unauthorized trades occurred. UBS also said it would take “appropriate disciplinary action” against other individuals in the equities business and in other areas.

Amnesty Program Yields Millions More in Back Taxes

September 16, 2011 by NewsMaker Leave a Comment

The voluntary disclosure program, which was in effect from February until last week, is part of an initiative to deter tax evasion via offshore bank accounts. Since the I.R.S. began its previous amnesty program in 2009, more than 30,000 taxpayers have reported their secret overseas accounts, and the federal government has collected $2.7 billion in taxes and penalties.

The United States began its most recent offensive against offshore tax evasion in 2009, when the Justice Department reached a settlement with the Swiss bank UBS that required it to pay $780 million and reveal details about 4,500 clandestine accounts that were believed to hold undeclared assets of United States residents. Although the Swiss government has yet to authorize the release of information about those accounts, Douglas H. Shulman, the I.R.S. commissioner, said that the agency would continue to pressure tax evaders to come forward or face prosecution.

The I.R.S. has opened three international offices in recent years to help track overseas funds, and has been working more closely with Justice Department prosecutors to seek criminal charges in the most serious cases.

“The world has clearly changed,” Mr. Shulman said in a news conference on Thursday. “We have pierced international bank secrecy laws, and we’re making a serious dent in offshore tax evasion.”

Tax evasion by individual American taxpayers is estimated to cost the federal government tens of billions a year in lost revenue, according to various studies.

Many tax lawyers had been skeptical that the I.R.S. amnesty program, which imposes stringent penalties, would be enough to lure tax evaders out of hiding. In addition to requiring that taxpayers repay as much as eight years of back taxes, the I.R.S. also added a penalty equal to 25 percent of the highest balance of the overseas account from 2003 to 2010. But Mr. Shulman said that the number of people who came forward exceeded the agency’s expectations.

Many international tax lawyers agreed that the amnesty had been productive.

But George M. Clarke, a tax lawyer at Miller Chevalier, said that the amnesty had induced only a small fraction of those with unreported offshore assets to come forward.

“We know the UBS — one bank — had more than 4,500,” said Mr. Clarke, who has defended numerous clients accused of tax evasion. “So with all the other banks in Switzerland and all over the world, why didn’t the amnesty get 50,000, or 100,000?”

Though Mr. Shulman said that many Swiss banks no longer provided secret accounts, the disclosure program had indicated the breadth of the problem, revealing assets that American citizens had hidden in at least 140 countries. As the Justice Department has pressured UBS and other banks in Switzerland and Lichtenstein to disclose more information about American depositors, many citizens have moved their assets to Asia.

It is unlikely that the I.R.S. will offer any additional amnesty programs, but Mr. Shulman said that the government would continue to pursue offshore tax evasion aggressively.

“Not only are we bringing people back into the U.S. tax system, we are bringing revenue into the U.S. Treasury and turning the tide against offshore tax evasion,” Mr. Shulman said.

Article source: http://feeds.nytimes.com/click.phdo?i=2c3dd21c57319257369255f59274ac94

Filed Under: Business News Tagged With: amnesty program, overseas accounts, swiss bank

A UBS Customer Pleads Guilty to Tax Evasion

June 28, 2011 by NewsMaker Leave a Comment

The former lawyer, Kenneth Heller, banked the money with UBS and then moved it to a smaller private Swiss bank, Wegelin, in June 2008 after reading that UBS might identify account holders, federal prosecutors said.

Mr. Heller is the sixth person to plead guilty to criminal charges of tax evasion out of seven charged in April 2010. He faces a possible maximum prison term of 15 years after his guilty plea before Judge P. Kevin Castel of United States District Court in Manhattan. Sentencing was scheduled for Sept. 27.

In February 2009, UBS entered into a deferred prosecution agreement with the United States, admitting it had helped taxpayers hide accounts from the Internal Revenue Service.

As part of the agreement, UBS provided the government with names and account information for a number of United States-based account holders whom bank employees had helped to hide their money to avoid paying taxes.

The indictment against Mr. Heller said he had opened a UBS account in the name of a sham offshore company in December 2005. The next month, he wired $26.4 million from the United States to the account and his name did not appear as the account holder on UBS documents.

Article source: http://feeds.nytimes.com/click.phdo?i=cae1307ac8cac6c5839603dfa1f4909c

Filed Under: Business News Tagged With: swiss bank, tax evasion, united states district