UBS profit beats forecasts despite U.S. mortgage suit settlement

Mon Jul 22, 2013 9:34am EDT
 
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By Katharina Bart

ZURICH (Reuters) - UBS's second-quarter profit beat forecasts even though it agreed to settle a lawsuit with the U.S. housing regulator over the mis-selling of mortgage-backed bonds, boosting shares in Switzerland's largest bank to two-year highs.

A number of European banks - including Deutsche Bank, Barclays, Credit Suisse, HSBC and Royal Bank of Scotland - collectively face possible multi-billion dollar bills arising from U.S. cases involving mortgages, which lay at the heart of the 2008 financial crisis.

UBS said on Monday it had reached an agreement in principle with the Federal Housing Finance Agency (FHFA), prompting it to release its headline second-quarter results more than a week early, showing net profit had jumped by nearly two thirds.

The Zurich-based bank did not say how much the FHFA settlement would cost but it took a charge of about 865 million francs ($920 million) to cover litigation costs, provisions and writedowns related to the deal and a Swiss tax agreement with Britain.

The FHFA sued 18 banks, accusing them of misleading U.S. government-sponsored mortgage companies Fannie Mae and Freddie Mac about $200 billion in mortgage-backed bonds they purchased.

UBS did not reveal on Monday whether it would admit to mis-selling the bonds, although it said the settlement cost would be covered by charges taken in the second quarter and previous periods. Citigroup and General Electric have already settled with the FHFA for undisclosed sums.

Last week 14 banks, including UBS, lost an attempt to have a U.S. appeals court intervene in their cases with the FHFA amid complaints by the banks about the judge hearing their cases.

Analysts at Credit Suisse had previously estimated UBS faced a possible $1.2 billion litigation loss from the FHFA lawsuit and a further $2.3 billion in U.S. mortgage-related legal costs including class action suits by investors.   Continued...

 
The logo of Swiss bank UBS is seen on an office building in Zurich July 22, 2013. UBS said on Monday it settled a Federal Housing Finance Agency lawsuit over soured mortgage investments, taking an 865 million Swiss franc ($919.63 million) charge against second-quarter earnings for litigation, impairments and other provisions. REUTERS/Arnd Wiegmann