UBS prepares for impact of massive $5 billion fine

UBS prepares for impact of massive $5 billion fine
CEO Sergio Ermotti says bank will prioritize protection of its dividends.
FEB 22, 2019

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.

Latest News

Merrill to pay $39 million in cash sweep settlement
Merrill to pay $39 million in cash sweep settlement

The financial advice industry has been facing inquiries into its cash sweep programs for years now.

SEC accuses fund advisor of defrauding SpaceX, OpenAI investors
SEC accuses fund advisor of defrauding SpaceX, OpenAI investors

Investor money allegedly went to strip clubs, exotic cars, and landscaping

RIA moves: Savant enters Thousand Oaks as Procyon lands in New Jersey
RIA moves: Savant enters Thousand Oaks as Procyon lands in New Jersey

Procyon adds $415 million in assets under management in New Jersey while Savant picks up a $213 million Southern California planning firm

Beyond sell or inherit: A third exit for appreciated property
Beyond sell or inherit: A third exit for appreciated property

With a growing number of real estate-rich Baby Boomers aging into retirement, some advisors may be failing to consider all the options available for those clients' assets.

AI marketing adoption gap costs financial firms revenue
AI marketing adoption gap costs financial firms revenue

Cornerstone Advisors study reveals compliance bottlenecks stall campaigns weeks after customer opportunities close.

SPONSORED In the Age of AI, Trust Becomes the Advisor's Greatest Asset

As AI makes financial information more accessible than ever, Lana Hock explains why human judgment, trust, and empathy remain the qualities clients value most in a financial advisor

SPONSORED Direct indexing webinar targets tax-loss harvesting amid market swings

Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains