UBS Settles LIBOR Scam with $1.5B

RELATED QUOTES

SymbolPriceChange
UBS14.28+0.18
JPM67.50+0.55
BCS8.92+0.22
RBS5.24+0.03
BAC16.19+0.35

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...
  • Shell's U.S. deal to unlock global oil asset disposals
    Shell's U.S. deal to unlock global oil asset disposals Reuters - 4 minutes 50 seconds ago

    Royal Dutch Shell's first oil field sale after its $54 billion (41.25 billion pounds) BG Group acquisition bodes well for its disposal talks in the North Sea, Gabon and New Zealand, according to sources, signalling buyers will meet its expectations … More »

  • Exclusive: SWIFT discloses more cyber thefts, pressures banks on security
    Exclusive: SWIFT discloses more cyber thefts, pressures banks on security Reuters - 6 minutes ago

    In a private letter to clients, SWIFT said that new cyber-theft attempts - some of them successful - have surfaced since June, when it last updated customers on a string of attacks discovered after the attack on the Bangladesh central bank. The … More »

  • Tokyo stocks open higher as weaker yen offsets Wall Street loss AFP - 22 minutes ago

    Tokyo stocks rallied in opening trade on Wednesday as a weaker yen and bargain-hunting offset a lacklustre lead from Wall Street. The benchmark Nikkei 225 index soared 0.79 percent, or 132.47 points, to ... … More »

  • SWIFT discloses more cyber thefts, pressures banks on security
    SWIFT discloses more cyber thefts, pressures banks on security Reuters - 24 minutes ago

    In a private letter to clients, SWIFT said that new cyber-theft attempts - some of them successful - have surfaced since June, when it last updated customers on a string of attacks discovered after the attack on the Bangladesh central bank. The … More »

  • How Much Does It Cost To Run A Hawker Stall In Singapore?
    How Much Does It Cost To Run A Hawker Stall In Singapore? DollarsAndSense.sg - 32 minutes ago

    Two young hawkers share with us their cost of running a stall. The post How Much Does It Cost To Run A Hawker Stall In Singapore? appeared first on DollarsAndSense.sg. … More »

  • Los Angeles developer buys iconic Tribune Tower in Chicago
    Los Angeles developer buys iconic Tribune Tower in Chicago Associated Press - 43 minutes ago

    The iconic Tribune Tower on Chicago's Michigan Avenue will have a new owner. Los Angeles-based CIM Group has agreed to buy the tower for up to $240 million. Chicago-based Tribune Media announced the deal ... … More »

  • Asian Futures Look Beyond U.S. Losses as Yen, Oil Nurse Declines Bloomberg - 51 minutes ago

    Futures on stock gauges in Sydney and Hong Kong edged higher, even as a drop in Apple Inc. helped drag the S&P 500 Index down 0.2 percent Tuesday, almost erasing its August advance. U.S. crude fell for a third session, ahead of government data … More »

  • APNewsBreak: Ohio State tells alumni clubs to fall in line Associated Press - 55 minutes ago

    Ohio State University is requiring its roughly 150 alumni clubs and societies to keep mum when it comes to disparaging comments about the school, or risk losing the money and other perks it provides them. ... … More »

  • Kurdish-backed fighters in Syria agree Turkey truce
    Kurdish-backed fighters in Syria agree Turkey truce AFP News - 1 hour 37 minutes ago

    Kurdish-backed militias in Syria agreed Tuesday to a US initiative to stop fighting Turkish forces whose week-old incursion in the country has stoked tensions between Washington and Ankara. The truce was announced separately by a senior US defence … More »

  • Russia questions report blaming Syria regime for gas attacks
    Russia questions report blaming Syria regime for gas attacks AFP News - 1 hour 38 minutes ago

    Russia on Tuesday questioned the findings of a UN-led investigation that blamed the Syrian regime for chemical attacks, saying they were not conclusive enough to trigger sanctions. Britain and France called for UN sanctions after the investigative … More »

  • Pimco’s Baz Says Japan In a Bind as Total Debt Tops 600% of GDP Bloomberg - 1 hour 40 minutes ago

    With a government debt load that’s 2 1/2 times the size of annual gross domestic product and a total national borrowing burden that’s six times as large, “Japan is suffering from the excesses of the past” and the country “is in a bind right now,’’ … More »

  • Political Hotspots May Bubble Up on G-20 Sidelines in China Bloomberg - 2 hours 32 minutes ago

    Last year’s summit in Turkey was overshadowed by Islamic State’s deadly attacks on Paris just days before. The previous year in Australia, talks were dominated by Russia’s occupation of Crimea and its alleged support for Ukraine separatists. The … More »

  • EU tax avoidance action could hurt foreign investment: U.S. Treasury Reuters - 2 hours 36 minutes ago

    The actions of European regulators could hurt foreign investment, the U.S. Treasury said on Tuesday after the European Commission ruled Apple must pay up to 13 billion euros ($14.5 billion) in taxes plus interest to the Irish government. "The … More »

  • White House 'concerned' EU tax penalty on Apple may hit U.S. taxpayers Reuters - 2 hours 36 minutes ago

    The White House said on Tuesday it was concerned about a European Commission order for Apple Inc to pay billions in unpaid taxes to Ireland because it seemed TO undermine joint U.S.-EU progress on creating a more fair international tax system. … More »

  • EU hits Apple with 13 billion euro Irish tax demand
    EU hits Apple with 13 billion euro Irish tax demand Reuters - 2 hours 37 minutes ago

    BRUSSELS/DUBLIN (Reuters) - The European Commission ordered Apple Inc to pay Ireland unpaid taxes of up to 13 billion euros ($14.5 billion) on Tuesday as it ruled the firm had received illegal state aid. Apple and Dublin said the U.S. company's tax … More »

  • S&P 500’s August Advance in Peril as Apple Slumps; Dollar Climbs Bloomberg - 2 hours 41 minutes ago

    The S&P 500 Index dropped from near a record high as the iPhone maker was ordered to pay 13 billion euros ($14.5 billion) plus interest in a European Union tax crackdown. The dollar rose against most of its major peers, while Treasuries held onto … More »

  • US, European markets split as Apple hit with $14.5 bn tax bill
    US, European markets split as Apple hit with $14.5 bn tax bill AFP News - 2 hours 43 minutes ago

    European and US equities markets went in opposite directions on Tuesday, with Wall Street in negative territory after European officials ordered Apple to pay $14.5 billion in back taxes. Apple's shares fell 0.8 percent on the Nasdaq, leaving them … More »

  • Dollar rises after US consumer confidence uptick AFP - 2 hours 54 minutes ago

    The dollar on Tuesday continued rising against major currencies following a gain in US consumer confidence. Markets were also anticipating Friday's release of official US figures on monthly job creation, ... … More »

  • Oil falls on strong dollar, crude glut; storms limit losses
    Oil falls on strong dollar, crude glut; storms limit losses Reuters - 3 hours ago

    Oil prices fell Tuesday, with Brent losing nearly 2 percent, as the dollar rallied and glut worries grew amid forecasts for higher U.S. crude stockpiles and Iran's remark that it was on target to reach peak production. News that energy firms in the … More »

  • Business Highlights Associated Press - 3 hours ago

    ___ EU orders Apple to pay up to 13B euros in back taxes Apple has to pay up to 13 billion euros ($14.5 billion) — plus billions more in interest — in back taxes to Ireland after the European Union found ... … More »

  • Wall St. weighed by Apple but banks shine on
    Wall St. weighed by Apple but banks shine on Reuters - 3 hours ago

    Apple Inc was the largest weight on U.S. stock indexes on Tuesday after antitrust regulators ordered the company to pay about $14.5 billion in back taxes to the Irish government, but gains in bank shares partly offset the decline. The S&P 500 fell … More »

  • Templeton’s Hasenstab Finds Haven in Emerging-Market Assets (1) Bloomberg - 3 hours ago

    In this new economic world, emerging markets are becoming a surprising haven, according to Franklin Templeton bond manager Michael Hasenstab, who beat almost all his peers for years until making wrong-way bets on the yen and Treasuries. While his … More »

  • Perceptron reports 4Q loss Associated Press - 3 hours ago

    The Plymouth, Michigan-based company said it had a loss of $1.66 per share. Earnings, adjusted for non-recurring costs, came to 8 cents per share. The industrial measurement and inspection company posted ... … More »

  • EU ruling on Apple stirs calls for U.S. tax reform
    EU ruling on Apple stirs calls for U.S. tax reform Reuters - 3 hours ago

    A European Commission order requiring Apple Inc (AAPL.O) to pay Ireland $13 billion euros ($14.5 billion) in unpaid taxes on Tuesday drew swift rebukes from the Obama administration and lawmakers in Congress, while reigniting calls for U.S. tax … More »

  • ICBC Halts Bad-Loan Increases With $6.3 Billion of Write-Offs Bloomberg - 3 hours ago

    ICBC wrote off 42 billion yuan ($6.3 billion) of loans in the first half, 35 percent more than a year earlier, an earnings statement showed Tuesday. “It’s a race of NPL formation against NPL disposal,” Yi Huiman, ICBC’s chairman, told analysts at a … 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

    Market Data

    • Currencies
      Currencies
      NamePriceChange% Chg
      1.3640+0.0002+0.01%
      USDSGD=X
      1.5205+0.0009+0.06%
      EURSGD=X
      1.7848+0.0014+0.08%
      GBPSGD=X
      75.4490-0.009-0.01%
      SGDJPY=X
      5.6861+0.0013+0.02%
      SGDHKD=X
      2.97120.000.00%
      SGDMYR=X
      9,766.3584+6.3438+0.06%
      SGDIDR=X
      4.8961-0.0008-0.02%
      SGDCNY=X
      1.0253+0.0009+0.09%
      AUDSGD=X
    • Commodities
      Commodities
      NamePriceChange% Chg
      1,314.70-1.80-0.14%
      GCZ16.CMX
      18.52-0.06-0.31%
      SIU16.CMX
      91.84-5.09-5.25%
      ^XAU
      2.070.00+0.05%
      HGU16.CMX
      46.25-0.10-0.22%
      CLV16.NYM
    • Bonds
      Bonds
      TreasuryYield (%)Yield Change
      1.180.00
      ^FVX
      1.570.00
      ^TNX
      2.23+0.02
      ^TYX