UBS Settles LIBOR Scam with $1.5B

RELATED QUOTES

SymbolPriceChange
UBS13.43-0.02
JPM66.36+0.58
BCS8.66-0.02
RBS4.60-0.01
BAC15.29+0.20

UBS AG (UBS) has finally conceded to paying a penalty of CHF 1.4 billion ($1.5 billion) to the U.S., U.K. and Swiss authorities to resolve charges against the bank for its involvement in the manipulation of the London Interbank Offered Rate (:LIBOR).

UBS admitted to the charges brought forward by the regulators and said that it involved LIBOR rate in several currencies - Yen LIBOR, GBP LIBOR, CHF LIBOR, Euro LIBOR, USD LIBOR, Euribor and Euroyen TIBOR.

Further, as part of a proposed agreement with the U.S. Department of Justice, its Japanese subsidiary, UBS Securities Japan Co. Ltd., entered a plea for issues related to the manipulation of certain benchmark interest rates, including Yen LIBOR.

Of the total penalty amount, CHF 1.2 billion will be paid in fines to the Department of Justice and U.S. Commodity Futures Trading Commission, GBP 160 million in fines to the Financial Services Authority and CHF 59 million as disgorgement of estimated profits to Swiss Financial Markets Authority (:FINMA).

While settling the charges is a positive step, the upfront cost that UBS needs to bear will lead to the company reporting a loss in the fourth quarter which will likely be in the range of CHF 2.0 to 2.5 billion ($2.2 billion to $2.7 billion). Since the quarter is yet to finish, the final amount is anticipated to vary.

In addition to the CHF 2.1 billion related to the total provisions for litigation and regulatory matters, (comprising not only the LIBOR settlements, but also claims associated with the sales of residential mortgage backed-securities and other matters), the fourth quarter projected loss figure includes a couple of other items.

This consists of around CHF 0.5 billion in restructuring charges as well as approximately CHF 0.4 billion related to own credit loss on financial liabilities designated at fair value. However, on an adjusted bais, UBS anticipates posting a profit of CHF 2.5 to 3.0 billion (pre-tax) for the year.

However, this settlement does not put to rest the probes by governmental authorities as well as private litigation disclosed in the company’s third quarter 2012 report. Those remain ongoing despite this settlement.

The Back Story

As a matter of fact, UBS had been subject to scrutiny over this issue for quite some time by the U.S. Commodity Futures Trading Commission, the Justice Department, the U.K. Financial Services Authority, and the Swiss regulators.

In addition to UBS, several of the big banks including Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM) are under the strict vigil of the regulators around the world in connection to the LIBOR manipulation scam.

The LIBOR is determined on the basis of estimates of rates at which banks find it appropriate to borrow from each other. It is alleged that banks coordinated amongst themselves and submitted false rates. This fraudulent move was made to profit from trades or to appear more creditworthy than they actually are.

Since LIBOR is used as a benchmark for several lending transactions around the world, any manipulation would impact billions of users around the globe. Hence, regulatory authorities are investigating the matter thoroughly and plan to put forward an exemplary judgment so as to terminate such shrewd practices in future, bring justice to the sufferers and punish the wrongdoers.

Earlier in the year, Barclays Plc. (BCS) admitted to its fraudulent practices and agreed to pay a penalty of $450 million for rigging the LIBOR. On the other hand, Royal Bank of Scotland Group Plc. (RBS) also hopes to achieve a settlement early next year.

In Conclusion

While the settlement will put to rest a long-drawn investigation and UBS can breathe relief, this will also adversely impact its financials. Further, this settlement could be referred to as an exemplary one and could trigger similar settlements by other banks depending on their wrongdoings.

Also, in November, the company was slapped with a fine of £29.7 million ($47.6 million) for failing to prevent significant unauthorized trading that resulted in a substantial loss totaling $2.3 billion.

Notably, UBS’ business has been severely impacted by the financial crisis and the company suffered huge losses on credit bets during that time. However, the Swiss government came to its aid and currently the company is subject to stringent capital norms. Moreover, the tax probe and mounting legal claims have added to its woes.

However, amidst such crisis and a challenging operating environment as well as increased capital needs, in recent months, the company announced overhauling measures, which are aimed at developing its core businesses and downsizing its distressed units.

While these are encouraging, we believe the troubles for this stock are far from over. Hence, for UBS, which currently retains a Zacks #4 Rank, implying a short-term Sell rating, we believe that following this announcement of the penalty, estimates could go down, leading to a deterioration in its Zacks Rank.

Read the Full Research Report on UBS

Read the Full Research Report on JPM

Read the Full Research Report on BCS

Read the Full Research Report on RBS

Read the Full Research Report on BAC

Zacks Investment Research



More From Zacks.com

--

Get stories like this on the Yahoo app and discover more every day.
Download it now.
Loading...
  • Brewer AB InBev shareholders approve takeover of rival SABMiller
    Brewer AB InBev shareholders approve takeover of rival SABMiller AFP News - 12 minutes ago

    Shareholders of brewing giant Anheuser-Busch InBev approved the blockbuster takeover of rival SABMiller, the brewer said on Wednesday, clearing a major hurdle towards one of the biggest mergers ever attempted. … More »

  • Asian markets down, energy firms hit by oil deal woes
    Asian markets down, energy firms hit by oil deal woes AFP News - 15 minutes ago

    Tokyo stocks led a broad retreat in Asian markets Wednesday as the yen recovered, while regional energy firms struggled with crude prices on concern about the chances of success at an upcoming producers' meeting. Standard Chartered Bank fell two … More »

  • AB InBev to retain its name after SABMiller takeover Reuters - 34 minutes ago

    BRUSSELS (Reuters) - Anheuser-Busch InBev said on Wednesday that it would retain its existing name after a planned $100-billion-plus (76.89 billion pounds) takeover of rival SABMiller. SABMiller shareholders ... … More »

  • UK's Phoenix to buy Deutsche Bank's Abbey Life for $1.22 billion Reuters - 1 hour 1 minute ago

    (Reuters) - Phoenix Group Holdings, Britain's largest owner of life assurance funds closed to new customers, said it would buy Deutsche Bank AG's British insurance business Abbey Life Assurance Co for ... … More »

  • Two new tsars to be created as Airbus reorganisation takes shape
    Two new tsars to be created as Airbus reorganisation takes shape Reuters - 1 hour 5 minutes ago

    Airbus Group Chief Executive Tom Enders plans to expand a shake-up of Europe’s largest aerospace group by promoting two executives to oversee engineering and programmes as he forces through more "integration" to prepare for future competition. … More »

  • JTC launches Tuas site for sale
    JTC launches Tuas site for sale The Edge Property - 1 hour 8 minutes ago

    JTC has launced a confirmed-list site at Tuas South Link 2 (Plot 11) for sale by public tender. It is the third of the seven confirmed-list sites for the 2H2016 Industrial Government Land Sales Programme.The 53,997 sq ft site is zoned for business 2 … More »

  • Oil stages tepid rebound as hopes ease for output deal AFP - 1 hour 9 minutes ago

    Oil prices posted marginal gains in Asia Wednesday as an industry report showing a decline in US stockpiles was offset by worries about the chances of this week's key producers meeting ending with a deal ... … More »

  • Gold hits one-week low as dollar firms
    Gold hits one-week low as dollar firms Reuters - 1 hour 9 minutes ago

    Gold prices slipped on Wednesday to touch a one-week low, after suffering its biggest single-day loss in nearly a month in the previous session, on a firmer dollar. The safe haven asset slid nearly 1 percent on Tuesday, its biggest single session … More »

  • Motoring group AA posts first half revenue rise, sees no Brexit impact Reuters - 1 hour 12 minutes ago

    The results strip out any contribution from AA Ireland, which AA agreed to sell to a Carlyle Group fund and financial services buyout team in June for 156.6 million euros. The firm said it had not seen any impact of Brexit-related issues on its … More »

  • World Bank releases $300 mn for Syrian refugees in Jordan
    World Bank releases $300 mn for Syrian refugees in Jordan AFP News - 1 hour 12 minutes ago

    The World Bank announced it will release $300 million in loans to help facilitate the labor market for Syrian refugees in Jordan. The funds will be used to attract investors and create reforms that will help grant access to the Syrian labor force, … More »

  • European stocks climb at open AFP - 1 hour 13 minutes ago

    Europe's main stock markets rose at the open of trading on Wednesday, with London's benchmark FTSE 100 index climbing 0.3 percent to 6,826.28 points. In the eurozone, Frankfurt's DAX 30 grew 0.6 percent ... … More »

  • Zuckerberg initiative poaches AstraZeneca board member Reuters - 1 hour 13 minutes ago

    The $3 billion (2.3 billion pounds) health initiative set up by Facebook co-founder Mark Zuckerberg and his wife Priscilla Chan has hired one of AstraZeneca's non-executive directors to head up its science drive. The British drugmaker said on … More »

  • Yellen likely to face questions about Wells Fargo
    Yellen likely to face questions about Wells Fargo Associated Press - 1 hour 14 minutes ago

    Federal Reserve Chair Janet Yellen, who has been in the hot seat over the central bank's interest-rate policy, now has another headache: Wells Fargo. Yellen is likely to face sharp questions from a House ... … More »

  • Rolls-Royce appoints new strategy and digital executives Reuters - 1 hour 17 minutes ago

    British engineer Rolls-Royce appointed veteran M&A banker Ben Story to oversee its strategy and marketing, and Neil Crockett to develop its digital affairs, completing its new-look senior line up on Wednesday. Rolls-Royce, in the middle of a major … More »

  • BELOW $1 MILLION: Freehold one-bedder near Dhoby Ghaut
    BELOW $1 MILLION: Freehold one-bedder near Dhoby Ghaut The Edge Property - 1 hour 18 minutes ago

    A 474 sq ft one-bedroom unit at Parc Sophia has been listed on TheEdgeProperty.com at $898,000 or $1,895 psf.Parc Sophia is a freehold apartment on Adis Road. Completed in 2011, the 152-unit development is within 300m from Dhoby Ghaut MRT … More »

  • Trump has turned over tax returns _ for lawsuits and loans
    Trump has turned over tax returns _ for lawsuits and loans Associated Press - 1 hour 26 minutes ago

    While Donald Trump won't publicly release his income tax returns, the New York businessman has turned them over when it suited his needs — if he stood to make a profit, needed a loan or when a judge forced ... … More »

  • US fines RBS bank $1.1 bn over pre-crisis mortgages
    US fines RBS bank $1.1 bn over pre-crisis mortgages AFP News - 1 hour 29 minutes ago

    Royal Bank of Scotland on Wednesday said it had agreed a fine of $1.1 billion (982 million euros) with US authorities over the alleged mis-selling of mortgage securities ahead of the 2008 financial crisis. It comes a week after US authorities said … More »

  • Asian stock markets turn lower after Wall Street gains
    Asian stock markets turn lower after Wall Street gains Associated Press - 1 hour 35 minutes ago

    Major Asian stock markets were lower Wednesday after investors were reassured by trade-friendly Hillary Clinton's performance in a U.S. presidential debate with rival Donald Trump. KEEPING SCORE: Tokyo's ... … More »

  • Travel firm TUI Group nudges up full-year profit outlook
    Travel firm TUI Group nudges up full-year profit outlook Reuters - 1 hour 40 minutes ago

    Holiday company TUI Group lifted its 2015/16 core profit guidance on Wednesday, helped by strong demand from British tourists and a lower exposure than its biggest rival to Turkey which has been hit by security fears. TUI said on Wednesday that it … More »

  • Shareholders vote on AB Inbev-SABMiller beer megamerger
    Shareholders vote on AB Inbev-SABMiller beer megamerger AFP News - 1 hour 41 minutes ago

    Shareholders of brewing giants Anheuser-Busch InBev and rival SABMiller will vote on Wednesday on a blockbuster merger that would create the biggest beer company in the world. Belgium-based AB InBev, the brewer of Budweiser and Stella Artois, is … More »

  • Oil climbs after industry data shows U.S. inventory draw
    Oil climbs after industry data shows U.S. inventory draw Reuters - 1 hour 42 minutes ago

    Oil prices rose in mixed trading on Wednesday, after sharp losses in the previous session, as industry data showed a surprise draw in U.S. crude stocks, although worries over a lack of agreement among producers to curb output kept a lid on gains. … More »

  • 10 things in tech you need to know today
    10 things in tech you need to know today Business Insider - 1 hour 43 minutes ago

    Reuters/Beck Diefenbach Good morning! Here’s the tech news … Continued The post 10 things in tech you need to know today appeared first on Business Insider. … More »

  • Canada approves $36 bn LNG project, eyes Asia
    Canada approves $36 bn LNG project, eyes Asia AFP News - 1 hour 45 minutes ago

    Canada approved a massive Can$36 billion ($27 billion USD) project by Malaysia's Petronas to build a liquefied natural gas pipeline along its Pacific Northwest coast, targeting Asian markets. The project is the first deal by Canada's year-old … More »

  • Engineer Smiths Group posts fall in underlying FY revenue Reuters - 1 hour 50 minutes ago

    (Reuters) - British engineering conglomerate Smiths Group Plc said underlying full-year revenue fell nearly 2 percent on a decline in sales at one of its biggest units. Revenue for the year ended July ... … More »

  • Canada approves $8 bln LNG plant, but Petronas to review project Business Times - 2 hours 0 minutes ago

    RICHMOND/ KUALA LUMPUR: Malaysia’s Petronas said on Wednesday that it would review a proposed C$11 billion ($8.3 billion) liquefied natural gas plant in western Canada that was approved by Ottawa following a three-year wait. Many analysts are … More »

 
Recent Quotes
Symbol Price Change % Chg 
Your most recently viewed tickers will automatically show up here if you type a ticker in the "Enter symbol/company" at the bottom of this module.
You need to enable your browser cookies to view your most recent quotes.
 
Sign-in to view quotes in your portfolios.

MARKET MOVERS

  • Most Actives
    Most Actives
    NamePriceChange% Chg
    0.149+0.008+5.67%
    N21.SI
    0.97+0.01+0.52%
    Y92.SI
    0.144+0.002+1.41%
    5DM.SI
    3.990.000.00%
    Z74.SI
    0.665+0.040+6.40%
    BMT.SI
  • % Gainers
    % Gainers
    NamePriceChange% Chg
    0.24+0.05+26.32%
    AWI.SI
    0.15+0.02+15.38%
    RF7.SI
    0.215+0.026+13.76%
    I07.SI
    0.13+0.01+8.33%
    5UE.SI
    0.161+0.011+7.33%
    5PL.SI
  • % Losers
    % Losers
    NamePriceChange% Chg
    0.112-0.028-20.00%
    BEH.SI
    0.22-0.03-13.73%
    AZT.SI
    0.66-0.05-7.04%
    BTE.SI
    0.40-0.03-6.98%
    B58.SI
    0.325-0.005-1.52%
    BEW.SI

Market Data

  • Currencies
    Currencies
    NamePriceChange% Chg
    1.3611+0.0016+0.12%
    USDSGD=X
    1.5248-0.0001-0.01%
    EURSGD=X
    1.7698-0.0004-0.02%
    GBPSGD=X
    73.9870+0.131+0.18%
    SGDJPY=X
    5.6960-0.0063-0.11%
    SGDHKD=X
    3.0408+0.0018+0.06%
    SGDMYR=X
    9,522.0586-6.3945-0.07%
    SGDIDR=X
    4.9014-0.0041-0.08%
    SGDCNY=X
    1.0447+0.0025+0.24%
    AUDSGD=X
  • Commodities
    Commodities
    NamePriceChange% Chg
    1,326.70-3.70-0.28%
    GCZ16.CMX
    19.12-0.05-0.23%
    SIZ16.CMX
    92.98-1.47-1.55%
    ^XAU
    2.18+0.01+0.55%
    HGZ16.CMX
    43.85+0.41+0.94%
    CLV16.NYM
  • Bonds
    Bonds
    TreasuryYield (%)Yield Change
    1.11-0.02
    ^FVX
    1.56-0.03
    ^TNX
    2.28-0.05
    ^TYX