The story of Bradley Birkenfeld, the man who blew the whistle on UBS’s tax dodging schemes to the Department of Justice in the US, is very odd.
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The story of Bradley Birkenfeld, the man who blew the whistle on UBS’s tax dodging schemes to the Department of Justice in the US, is very odd.
From Martin Lueck and team at UBS:
Who’s winning? Read more
UBS announced lacklustre results on Tuesday, saying it expected further weakness in investment banking in the first quarter.
But the bank also provided details of some interesting underlying trends at the bank, funding wise. The following table taken from the bank’s results statement provides a good summary (click to enlarge): Read more
UBS issued a gloomy outlook for the current year, noting the tough conditions experienced in 2011 were likely to be prolonged, meaning “traditional improvements in first quarter activity levels and trading volumes may fail to materialise fully”, the FT reports. The Swiss group warned such conditions would “weigh on” its first-quarter results, notably in investment banking. The downbeat forecast came as the group said net profits in the fourth quarter slumped to SFr393m ($426m), reflecting the severe pressures on earnings seen at some US rivals and at Deutsche Bank in Europe. Earnings were a fraction of the SFr1.66bn made in the same period the previous year and demonstrated the impact of tough markets, reluctant clients and heavy costs, in spite of savings. Fourth-quarter earnings in investment banking, as at some rivals, turned negative, with a SFr256m pre-tax loss, compared with a profit before tax of SFr100m the previous year. The poor results reflected sharply lower revenues in all the investment bank’s businesses, notably the two powerhouses of equities and fixed income, currencies and commodities.
Kweku Adoboli, the former UBS trader accused of causing the largest unauthorised trading loss in British history, has denied charges of fraud and false accounting, reports the FT. Mr Adoboli, 31, entered pleas of not guilty as he appeared for a third time at Southwark Crown Court in London after being accused of unauthorised trading following revelations of a $2.25bn loss at the Swiss bank last year. Mr Adoboli worked for UBS’s global synthetic equities division, buying and selling exchange traded funds. The not guilty plea will probably slow an investigation by the UK’s Financial Services Authority of alleged regulatory and compliance failings at UBS. The watchdog and Finma, the Swiss regulator, have jointly commissioned PwC to examine the losses and will probably receive a report next month. But any move to bring an enforcement action will be complicated by the need to protect Mr Adoboli’s right to a fair trial.
British and Swiss regulators are likely to begin enforcement proceedings against UBS for shortcomings that allowed a London trader to make unauthorised trades last year, the WSJ says, citing people familiar with the situation. In September, UBS disclosed that an employee on its London-based equity desk allegedly made unauthorised trades, and police subsequently arrested Kweku Adoboli in connection with the case. The scandal led to the resignation of chief executive Oswald Grübel shortly thereafter. A joint probe by the FSA and Switzerland’s Finma, that until now had been seen largely as a fact-finding mission to determine what went wrong, is now expected to result in regulators penalising the bank for gaps in oversight that allegedly allowed Mr Adoboli to make the trades without authorisation. Unlike the FSA, Finma does not have power to fine banks, but can force a bank to make changes such as to personnel.
January is on track to be one of the busiest in more than a decade for global covered bond sales by banks, as lenders race to secure funding after the eurozone sovereign debt crisis led to a dearth of issuance, the FT reports. The first three weeks of the year have seen a flurry of covered bond issuance, a type of over-collateralised debt that is considered very safe by investors, from northern European banks such as Aereal Bank, Lloyds Banking Group and UBS, as well as Australian lenders. So far this year $43bn has been raised by global banks using covered bonds, the second strongest start to the year since 2000, according to Dealogic. Significantly it is the first time that European banks have issued more covered bonds than senior unsecured debt, traditionally seen as the bedrock of bank funding but which in the second half of last year saw issuance in Europe slow to a crawl.
Citigroup on Tuesday sold $2.5bn of debt in its biggest bond offering since 2009. The bank lured strong interest by offering investors a hefty risk premium, or spread, of 360 basis points to US Treasuries on the five-year bonds, the FT reports, in the latest sign that US banks can still access the capital markets at a price while their European counterparts have struggled. The bonds were sold with a so-called new issuance concession of about 30bp more in yield than Citigroup’s existing five-year debt. The yield at the pricing was 4.48 per cent. Bloomberg reports that banks elsewhere geared up for covered bond issues, with UBS on Tuesday selling €1.5bn of five-year bonds for less than a third of the spread on its existing senior unsecured notes with a similar maturity. ING Bank is planning a €1.75bn issue, the agency said, citing a banker, and Credit Agricole, Caisse de Refinancement de l’Habitat, Lloyds, Norway’s Boligkreditt, and three large Australian banks were also planning covered bond sales.
Three Swiss bankers were charged with conspiring to help US citizens avoid paying taxes on $1.2bn in assets by allegedly persuading them to move their accounts from UBS once the bank fell under scrutiny, the latest sign that US authorities are expanding their investigation into Switzerland’s private banking world, the FT reports. The Department of Justice announced criminal charges on Tuesday against bankers Michael Berlinka, Urs Frei and Roger Keller. Citing a person familiar with the matter, the newspaper says each worked for Switzerland-based Wegelin. If convicted, each man faces up to five years in prison. Wegelin does not have offices in the US, according to court filings, but used a New York-based account at UBS to conduct its business. The three bankers worked out of the bank’s Zurich office, prosecutors said. Wegelin was not charged with any wrongdoing. Neither the bankers nor representatives for Wegelin could immediately be reached for comment.
A senior UBS private banker allegedly sanctioned the creation of an illegal offshore investment vehicle for one of India’s most powerful businessmen, saying that Anil Ambani’s status as a “mega-client” could justify waiving the rules, a London tribunal has been told. The FT says the claim, contained in email evidence submitted to the hearing this week, has been made in a case brought against two of UBS’s former wealth management executives by the UK’s financial regulator. The evidence shows that Kurt Kumschick, the Swiss bank’s recently deceased former marketing head for wealth management in the India-Pacific region, told two junior colleagues that whether the bank should create the Mauritius-based investment vehicle for Mr Ambani would be a “business decision” if the bank could not confirm its legality under Indian law. Mr Kumschick died this week, according to UBS officials. His estate has no representation at the tribunal.
Two UBS bankers tried to create an offshore vehicle through which one of India’s most powerful businessmen could illegally invest in securities at home, according to evidence heard in a London tribunal. The FT says Anil Ambani, whom bank executives described as a “mega-client”, was the ultimate owner behind a Mauritius-based vehicle called Pleuri, the tribunal heard. Pleuri was established with the specific objective of investing in Indian stocks, according to evidence presented by the UK’s financial regulator in a case against the former head of UBS’ London-based India desk. Indian nationals and companies are not permitted to invest in Indian securities through foreign institutional investors. The details emerged in the case of Sachin Karpe, former head of the desk that managed Indian client portfolios at UBS’s wealth management division in London. Mr Karpe is challenging a £1.25m fine from the FSA.
Well, not yours, obviously. But random market professionals in the City of London who in recent days have been contacted by the mighty Goldman Sachs.
From: Lloyd C. Blankfein [mailto:firstname.lastname@example.org]
Sent: 08 December 2011 19:33
Subject: Goldman Sachs requests your feedback: ADV solicitation materials from Goldman Sachs Read more
Sergio Ermotti flexed his muscles for the first time barely a fortnight after being confirmed as UBS’s chief executive with the abrupt departure of Maureen Miskovic as chief risk officer, the FT reports. Ms Miskovic is being replaced by Philip Lofts, a UBS veteran who had previously held the top risk job between 2008 and 2010 before being appointed chief executive of UBS’s operations in the Americas. The Swiss banking group said Ms Miskovic, a Briton who is leaving after less than a year in the job, was not pushed out because of the $2.3bn unauthorised trading affair at UBS’s London equity derivatives operation. However, as the executive ultimately responsible for risk, her position had been increasingly criticised by Swiss observers questioning her seniority and experience. Ms Miskovic, who had a degree in languages rather than mathematics or economics, was formerly chief risk officer at State Street, the US bank. Before that, she had worked at the Eurasia Group, a political risk consultancy. One of her longest stints had been at Lehman Brothers, where she was chief global risk officer between 1996 and 2002. Ms Miskovic was not immediately available for comment.
Jefferies Group has hired at least seven UBS bankers in Hong Kong in the past two months after luring Ren Wang from the Swiss lender to become its Asia president, says Bloomberg, citing three people with knowledge of the matter. Ronald Tam and Dai Qiang, both of whom were executive directors at UBS, were hired as managing directors for the New York-based firm’s investment banking team, the news agency reported. They are due to begin work in the first half of December.
UBS executives are considering cutting the group’s bonus pool in an effort to recoup some of the $2.3bn it lost in the alleged trading scandal centred on Kweku Adoboli, reports the FT. The Swiss bank last month opted not to eat into bonus accruals when it reported its third-quarter earnings. The approach, which meant that 90 per cent of the investment bank’s SFr1.35bn of third-quarter revenues was set aside for pay and bonuses, was widely criticised. Analysts said that it appeared the bank was seeking to push the cost of the trading scandal on to shareholders rather than its own employees. But Sergio Ermotti, the bank’s chief executive, has now told the Financial Times that there was “no way” bonuses would be unaffected by the shock trading loss, allegedly racked up by a low-level trader in London. The decision could end up cutting the year-end pay and bonus pool within the investment bank – worth SFr4.6bn ($5bn) as at the end of September – by as much as 10 per cent, according to some estimates. Meanwhile, Bloomberg reports on recruitment firm Astbury Marsden’s finding that the base pay of senior bankers in London had jumped 21 per cent by the end of September when compared to the previous year. However, the firm expects bonus pay to relatively low, especially as most of the pay increases were awarded at the beginning of the year when banks were feeling more confident than they are now.
UBS has outlined long-awaited plans to shrink its business dramatically and refocus on its core wealth management operations, making deep cuts to its investment bank, reports the FT. The Swiss banking group plans to cut more of its investment bank staff and slash its risk-weighted assets in its investment bank almost by half over the next five years. But in a surprise sop to investors, UBS will pay a token dividend this year – significantly ahead of expectations – and step up payments thereafter as a sign of its confidence in its future.
UBS is preparing to provide investors with details of a strategic plan that will shrink its investment bank’s balance sheet by half following the anointing of Sergio Ermotti as permanent group chief executive, reports the FT. Mr Ermotti’s confirmation on Tuesday came just two months after he was vaulted into the role on an interim basis following the departure of Oswald Grübel in September in the wake of a $2.3bn unauthorised trading scandal. Carsten Kengeter, the head of UBS’s investment bank, will stay on to oversee a sweeping restructuring of the Swiss group, according to people familiar with the matter, despite being passed over for the top job and still facing pressure to step down over the trading losses.
… shows no signs of letting up.
The latest casualty is Altium Securities. Read more
UBS agreed with the SEC on Thursday to pay $8m to settle allegations that it pervasively violated short selling record-keeping rules aimed at preventing abusive trading, the FT reports.The settlement followed the bank’s agreement to pay $12m last month to settle related short selling violations with the Finra, a self-regulatory organisation. As part of its cease and desist order with the SEC, UBS agreed to retain an independent consultant and did not admit or deny wrongdoing. According to the SEC, since at least 2007, UBS’s lending desk kept inaccurate “locate” logs. The practice was “pervasive, extending to every security handled by the lending desk”, the SEC said. The case alleging violations of the short selling rule known as “Reg Sho” is likely to be the first of several, says the newspaper.
Later this month embattled UBS will hold its big annual investor day in New York at which interim chief executive, Sergio Ermotti, is expected to spell out his plans for the troublesome investment banking arm.
A slimming down seems inevitable. But if Ermotti is having second thoughts about turning UBS into Julius Baer on steriods, he could do worse than cast an eye over one of the latest report from JP Morgan’s banks analyst Kian Abouhossein. Read more
The trustee overseeing the liquidation of Bernard Madoff’s fund suffered another setback as a US judge dismissed billions of dollars in claims filed against JPMorgan Chase and UBS, the FT reports. Tuesday’s ruling by Judge Colleen McMahon dismissed all so-called common law claims against the two banks, leaving the trustee room to pursue other claims seeking reduced damages. Irving Picard, the Madoff trustee, had sued JPMorgan for $19bn alleging the bank was Madoff’s primary bank and that it had aided and abetted in the decades-long Ponzi scheme. The trustee sued UBS for $2bn, alleging the bank mislead regulators and “lent an aura of legitimacy” to the Madoff fund by sponsoring and administering several international funds that fed money to Madoff. Following the court ruling, the trustee is left to pursue $400m in claims against JPMorgan and about $1bn against UBS. A spokeswoman for the trustee said he “remains confident” in the merits of the cases and intends to appeal against the decision.
One thing we’ve learnt about Delta One is that it’s head-scratchingly, mind-bogglingly tricky to explain.
And exactly how the division makes money, outside of the fees it charges investors is even harder to work out. Read more
UBS beat profit forecasts with their Q3 results on Tuesday, coming in with a SFr 1.02bn ($1.13bn) of net profit.
In the absence of unauthorised gains to offset them, unauthorised (er) losses from the trading scandal cost the group SFr 1.85bn. All more or less as expected, and in a tough market environment (click to expand):