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UBS Settles With U.S. Mortgage Regulator
Settlement will contribute to charges of $919 million in its second quarter results.
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By JOHN LETZINGZURICH—UBS AG UBSN.VX +2.50%agreed to pay a heavy fine to settle with U.S. regulators for allegedly misrepresenting mortgage-backed bonds sold during the American housing bubble, potentially resolving a lingering issue stemming from the Swiss lender's once-aggressive investment bank.
UBS said it has agreed to a settlement with the Federal Housing Finance Agency, the U.S. regulator for mortgage-finance giants Fannie Mae FNMA +6.38%and Freddie Mac, FMCC +6.92%over allegations that the Swiss banking giant sold defective mortgage-backed securities in the lead-up to the U.S. financial crisis between 2004 and 2007.
UBS didn't disclose the size of the fine, but the Zurich-based lender said its second-quarter results, which are expected in full later this month, will now include pretax charges for litigation matters totaling about 865 million Swiss francs ($919 million). About 700 million francs of that total is being booked to the bank's so-called corporate center, which houses legacy investment banking businesses that helped run UBS off the rails and contributed to it requiring a Swiss government bailout in 2008.
UBS is just one of a number of banks that have been pursued by the FHFA for allegedly selling defective mortgage-backed securities. In May, Citigroup Inc. C +0.60%also reached a related settlement with the regulator.
UBS plans to dramatically scale back its investment banking operation, which it now aims to use to bolster its core business of managing wealth for private banking clients.
Also on Monday, UBS previewed second-quarter results that mark significant progress in both its private banking business and financial stability. The bank said its results, which are due July 30, should include net inflows for its wealth management businesses of roughly 10.1 billion francs, and inflows of about 2.7 billion francs for its wealth management business in the Americas.
UBS expects that its tier 1 capital ratio—a key indicator of the higher quality capital UBS holds to buffer against potential losses—will reach 11.2% under international regulations known as Basel III which are being phased in world-wide.
UBS previously indicated that it aimed to reach a ratio of 13% by the end of 2014.
"They're clearly ahead of the game," Mediobanca MB.MI +0.22%analyst Christopher Wheeler said.
Mr. Wheeler also cited UBS's agreement with the FHFA as a positive, noting that while it remains unclear what UBS's specific fine will be, the deal marks "another piece of litigation out of the way," and the lender's shares rose nearly 3.5% by midday.
UBS's renewed focus on private banking was reflected in a recent report from Scorpio Partnership that ranked it first among private banks in terms of assets under management, with roughly $1.7 trillion.
But UBS's checkered past in investment banking continues to occasionally nag at it.
As it sought to vie with the biggest investment banks before the financial crisis, UBS racked up about $50 billion in losses from credit bets made during the U.S. housing bubble. The bank was making inroads in a number of businesses that would prove problematic, including the underwriting of bonds for U.S. cities including Detroit.
Detroit's bankruptcy has drawn attention to the city's efforts to free itself from a credit-hedging deal reached with UBS and Bank of America Corp.'s BAC +0.93%investment banking unit. The banks recently agreed to accept less than what they are owed under the terms of the agreement.
Late last year, UBS said it would cut about 10,000 jobs mainly at its investment bank, as it narrows its focus to services for clients such as advising on mergers and underwriting initial public offerings.
UBS's legacy positions in businesses it now wants to wind down have been shifted to its corporate center, an entity that houses remnants of lines such as trading in residential mortgages.
Earlier this year activist investor Knight Vinke Asset Management LLC criticized UBS's plans to retain even a scaled-down investment bank, arguing that it still represents too much potential risk.
Write to John Letzing at john.letzing@dowjones.com
http://online.wsj.com/article/SB1000142412788...html?dsk=y
Fannie Mae, Freddie Mac 2013 bill sale calendar
http://www.reuters.com/article/2013/07/22/idU...edType=RSS
UBS Settles With U.S. Mortgage Regulator
Settlement will contribute to charges of $919 million in its second quarter results.
Article Stock Quotes Comments (2) more in World Markets | Find New $LINKTEXTFIND$ ».
smaller Larger facebooktwittergoogle pluslinked ininShare.3EmailPrintSave ? More .
.
smaller Larger
By JOHN LETZINGZURICH—UBS AG UBSN.VX +2.50%agreed to pay a heavy fine to settle with U.S. regulators for allegedly misrepresenting mortgage-backed bonds sold during the American housing bubble, potentially resolving a lingering issue stemming from the Swiss lender's once-aggressive investment bank.
UBS said it has agreed to a settlement with the Federal Housing Finance Agency, the U.S. regulator for mortgage-finance giants Fannie Mae FNMA +6.38%and Freddie Mac, FMCC +6.92%over allegations that the Swiss banking giant sold defective mortgage-backed securities in the lead-up to the U.S. financial crisis between 2004 and 2007.
UBS didn't disclose the size of the fine, but the Zurich-based lender said its second-quarter results, which are expected in full later this month, will now include pretax charges for litigation matters totaling about 865 million Swiss francs ($919 million). About 700 million francs of that total is being booked to the bank's so-called corporate center, which houses legacy investment banking businesses that helped run UBS off the rails and contributed to it requiring a Swiss government bailout in 2008.
UBS is just one of a number of banks that have been pursued by the FHFA for allegedly selling defective mortgage-backed securities. In May, Citigroup Inc. C +0.60%also reached a related settlement with the regulator.
UBS plans to dramatically scale back its investment banking operation, which it now aims to use to bolster its core business of managing wealth for private banking clients.
Also on Monday, UBS previewed second-quarter results that mark significant progress in both its private banking business and financial stability. The bank said its results, which are due July 30, should include net inflows for its wealth management businesses of roughly 10.1 billion francs, and inflows of about 2.7 billion francs for its wealth management business in the Americas.
UBS expects that its tier 1 capital ratio—a key indicator of the higher quality capital UBS holds to buffer against potential losses—will reach 11.2% under international regulations known as Basel III which are being phased in world-wide.
UBS previously indicated that it aimed to reach a ratio of 13% by the end of 2014.
"They're clearly ahead of the game," Mediobanca MB.MI +0.22%analyst Christopher Wheeler said.
Mr. Wheeler also cited UBS's agreement with the FHFA as a positive, noting that while it remains unclear what UBS's specific fine will be, the deal marks "another piece of litigation out of the way," and the lender's shares rose nearly 3.5% by midday.
UBS's renewed focus on private banking was reflected in a recent report from Scorpio Partnership that ranked it first among private banks in terms of assets under management, with roughly $1.7 trillion.
But UBS's checkered past in investment banking continues to occasionally nag at it.
As it sought to vie with the biggest investment banks before the financial crisis, UBS racked up about $50 billion in losses from credit bets made during the U.S. housing bubble. The bank was making inroads in a number of businesses that would prove problematic, including the underwriting of bonds for U.S. cities including Detroit.
Detroit's bankruptcy has drawn attention to the city's efforts to free itself from a credit-hedging deal reached with UBS and Bank of America Corp.'s BAC +0.93%investment banking unit. The banks recently agreed to accept less than what they are owed under the terms of the agreement.
Late last year, UBS said it would cut about 10,000 jobs mainly at its investment bank, as it narrows its focus to services for clients such as advising on mergers and underwriting initial public offerings.
UBS's legacy positions in businesses it now wants to wind down have been shifted to its corporate center, an entity that houses remnants of lines such as trading in residential mortgages.
Earlier this year activist investor Knight Vinke Asset Management LLC criticized UBS's plans to retain even a scaled-down investment bank, arguing that it still represents too much potential risk.
Write to John Letzing at john.letzing@dowjones.com
http://online.wsj.com/article/SB1000142412788...html?dsk=y
Fannie Mae, Freddie Mac 2013 bill sale calendar
http://www.reuters.com/article/2013/07/22/idU...edType=RSS
