UBS third-quarter earnings almost triple

Swiss banking giant UBS said on Tuesday that its third quarter net profit nearly tripled, beating analyst expectations, even as it acknowledged it too had been questioned over a Fifa corruption scandal.

UBS third-quarter earnings almost triple
Photo: UBS

For the June to September quarter, UBS saw net profit swell to 2.07 billion  francs ($2.1 billion), soaring by 171 percent from the same period a year earlier.
Analysts polled by financial news agency AWP had expected Switzerland's largest bank to post a net profit of 1.7 billion francs.
But the dramatic rise was largely attributable to a 1.2-billion-franc net tax benefit, mainly related to an “upward revaluation of our deferred tax assets,” UBS said
The bank's adjusted profit before tax stood at 979 million francs for the quarter, it said.
UBS's operating income meanwhile inched up four percent year-on-year to 7.1 billion francs, slightly below the 7.2 billion anticipated by analysts.
Company chief Sergio Ermotti and chairman Axel Weber called the bank's performance “solid” even though “the macroeconomic backdrop for the quarter was very challenging,” because of widespread market volatility and dwindling activity in Asia.
This was especially apparent in the bank's wealth management division, they said, which saw “client transactional activity dropping to its lowest level in four years.”
The division saw its operating profit before tax drop 15 percent compared to the previous quarter, to 639 million francs.
The US wealth management division however saw its adjusted operating profit swell 24 percent over the previous quarter to $287 million.
The investment bank division meanwhile saw its operating profit before tax slip ten percent compared to the second quarter to 496 million francs.
UBS, meanwhile, also acknowledged in its earnings report that it had been questioned over banking links with crisis-wracked Fifa.
“UBS has . . . received inquiries from authorities concerning accounts relating to . . . Fifa and other constituent soccer associations and related persons and entities,” the bank said, saying it was “cooperating with authorities in these inquiries.”
The announcement came after the bank's main Swiss rival Credit Suisse announced Friday that it was under investigation by Swiss and US authorities over banking links with Fifa officials accused of bribery and corruption.

Following the announcement, UBS saw its share price slide 4.20 percent in mid-morning trading, sharply underperforming a just slightly weaker overall market.

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Switzerland’s UBS faces €3.7-billion fine as crucial court ruling looms

A Paris court will rule Wednesday on whether Swiss banking giant UBS illegally tried to convince French clients to hide billions of euros in Switzerland, charges which prompted prosecutors to seek a record €3.7-billion fine.

Switzerland's UBS faces €3.7-billion fine as crucial court ruling looms
UBS denies charges it helped French clients evade tax and says it will defend itself "vigorously". Photo: AFP

The trial opened last autumn after seven years of investigations, launched when several former employees came forward with claims of unlawful conduct. 

The move came as authorities across Europe cracked down on tax evasion and dubious banking practices in the wake of the global financial crisis which erupted in 2007.

The pressure eventually forced Switzerland to effectively end its tradition of ironclad bank secrecy, by joining more than 90 countries which agreed to automatically share more client account information among each other.

In the UBS case, French authorities determined that more than €10 billion had been kept from the eyes of tax officials between 2004 and 2012.

The National Financial Prosecutor's office urged a €3.7-billion ($4.2 billion) fine, the largest ever sought in France, saying the bank and its directors “were perfectly aware that they were breaking French law” by unlawfully soliciting clients and helping them evade French taxes.

They also sought a €15 million fine for UBS's French subsidiary, and fines of up to €500,000 for six top executives, including Raoul Weil, the former third-in-command at UBS, and Patrick de Fayet, formerly the second-ranking executive for its French operations.

In addition, lawyers for the French state, which is a plaintiff in the case, asked for €1.6 billion in damages.

UBS, which was ordered to post €1.1 billion in bail, has denied the charges and said its operations complied with Swiss law.

It also says that it was “unaware” that some French clients had failed to declare assets in Switzerland, and that prosecutors have not produced any proof, such as client names or account numbers, to back up their fraud claims.

The case is being closely watched by industry executives at a time when Paris and other European capitals are hoping to lure multinational banks from London as Brexit looms.

'Milk tickets'

UBS is accused of organising or inviting prospective clients to prestigious outings such as the French Open or luxury hunting retreats, where UBS's Swiss bankers would meet their “prospects” — something they were not allowed to do under French law.

UBS France directors then used notes called “milk tickets” to keep track of how many “milk cans” – amounts of money – were transferred to Swiss accounts.

They say the system was merely a way to balance out bonuses due to French bankers who were effectively losing a client to their Swiss peers, and the notes were later destroyed.

But investigators claim the “milk tickets” were proof that UBS had a parallel accounting system for keeping the transfers off its official books.

Only one “milk ticket” was found during the inquiry, prompting defence lawyers to argue there was no proof to justify claims of a massive fraud.

Yet prosecutors pointed to the roughly 3,700 French UBS clients who later took advantage of an amnesty offer to regularise their tax declarations with the French authorities.

UBS has been embroiled in a series of similar cases, most notably in the United States, where the authorities said the bank used Switzerland's banking secrecy laws to help rich clients avoid taxes.

In 2009 it paid $780 million to settle charges it helped thousands of American citizens hide money from the Internal Revenue Service, and agreed to turn over information on hundreds of clients, severely denting Switzerland's long tradition of shielding banking clients and their operations from prying eyes.

That case was also prompted by a former American UBS employee turned whistleblower, Bradley Birkenfeld, whose book “Lucifer's Banker: The Untold Story of How I Destroyed Swiss Bank Secrecy” was published in 2016.

Last November UBS was again sued by US authorities, who accuse the bank of misleading investors over the sale of mortgage-backed securities in 2006 and 2007, just before the financial crisis struck.

UBS has denied the charges and said it will defend itself “vigorously”.