UBS settles loan case as earnings soar 62 per cent

Tim Wallace
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SWISS bank UBS is paying SFr700m (£487m) to settle claims it overstated the quality of loans in the run up to the financial crisis, the lender announced yesterday.

US regulators brought the case after complaints from Fannie Mae and Freddie Mac who claim they were misled by 18 institutions into buying bad debts without realising the scale of the problems with the mortgage loans.

UBS also took a SFr100m hit on the upcoming Swiss-UK tax deal.

The bank’s profits came in at SFr690m for the second quarter, an increase of 62 per cent on the SFr425m it recorded in the same period of 2012.

And it registered net inflows of SFr10.1bn into its wealth management arm, coming after the bank announced plans to wind down some investment banking operations and focus on its strengths in areas such as asset management.

But investors remain concerned.

“While recognising that most of these losses relate to the past, UBS continues to have over SFr250bn of assets tied up in the investment bank, mostly in trading, with only SFr8bn of equity – and a further SFr400bn of what used to be investment banking assets sitting in its non-core and legacy assets portfolio,” said asset manager Knight Vinke.

“Until this is resolved, the risk of investment banking-related losses in the future remains intact.”

Nonetheless, UBS shares closed up 2.5 per cent on the day.