Significant drop in UBS earnings due to provisions for legal matters
Swiss bank UBS saw its net profit drop by more than half in the first quarter. This is mainly because the company had to set aside a lot of money for lawsuits in the US for UBS’s role in selling mortgage securities before the 2008 financial crisis.
The bank’s net profit fell by 52 percent to just over $1 billion (around 930 million euros transferred). Provisions for lawsuits related to the sale of US mortgage-backed securities were increased by $665 million. CEO Sergio Ermotti, who recently took over from Dutchman Ralph Hammers, said he “has been in advanced discussions with the US Department of Justice and is pleased to see progress on resolving the 15-year-old problem.”
The quarterly results come at a turbulent time for the Swiss bank. Last month, Swiss authorities more or less forced UBS to take over ailing rival Credit Suisse. Credit Suisse ran into financial troubles after years of scandals, losses and failures in risk management and was on the verge of bankruptcy.
On Monday, Credit Suisse announced that customers had withdrawn more than 62 billion euros from their bank accounts in the first quarter. According to Credit Suisse, the outflow of capital from the bank has decreased, but has not yet stopped.
On the other hand, UBS succeeded in attracting $28 billion (more than €25 billion) in new funds from high net worth clients in the months prior to the Credit Suisse acquisition. In the 10 days following the acquisition announcement, $7 billion poured in. UBS expects to complete the Credit Suisse acquisition in the second quarter.
“Travel enthusiast. Alcohol lover. Friendly entrepreneur. Coffeeaholic. Award-winning writer.”