UBS prepares for impact of massive $5 billion fine

CEO Sergio Ermotti says bank will prioritize protection of its dividends

Feb 22, 2019 @ 10:46 am

By Bloomberg News

UBS Group AG Chief Executive Officer Sergio Ermotti said the bank will prioritize protecting its dividends if it can't get out of paying a massive fine imposed in a French tax-evasion case.

"We need to consider our business outlook, including the impact of any idiosyncratic events like this one, " Mr. Ermotti said on a call with analysts and investors Friday. "In the event of a very adverse scenario, our priority would always be to protect the previous year's dividend."

(More: UBS at risk after $5 billion surprise penalty)

Switzerland's biggest bank on Wednesday was ordered to pay more than $5 billion Wednesday over a tax-evasion case in France — matching what was sought by prosecutors. That's five times what some analysts expected and more than 15 times what HSBC Holdings paid to settle a similar matter in France in 2017.

Mr. Ermotti said the bank is keeping its dividend guidance as well as its expectations for share buybacks. The company is in "constant dialogue" with regulators including the Swiss authority FINMA, he said.

Mr. Ermotti and his legal team have played hardball, rejecting allegations of wrongdoing and pushing the case to trial in the hope of wringing out a smaller penalty. The executive today said the bank wasn't prepared resolve legal issues "at any financial price." The bank is assessing the judgment and will update investors by April at the latest, he said.

UBS shares traded 0.9% higher at 12.46 francs as of 12:28 p.m. in Zurich.

(More:UBS saw decline in new client money in fourth quarter)

While UBS said it will appeal, the penalties dwarf what the bank had set aside for legal issues and amount to more than it earned for all of last year. UBS probably hasn't made significant provisions yet, according to analyst Jon Peace of Credit Suisse Group AG. UBS had set aside $640 million to resolve legal matters in wealth management, its biggest business.

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