LONDON - UBS on Tuesday reported a large loss for the fourth quarter, driven by costs to settle legal matters, including its role in the global rate manipulation scandal.
UBS booked a loss of 1.9 billion Swiss francs, or $2 billion, in the fourth quarter of last year compared to a profit of 323 million francs in the same period in 2011. The loss was slightly smaller than some analysts had predicted, and the Swiss bank also said it plans to buy back 5 billion francs of its debt to reduce its funding costs.
“The bank’s performance reflects the effects of the challenging operating environment during the year, the costs involved in reshaping the business and the actions we took to address the challenges we faced,†UBS chairman Axel Weber and the bank’s chief executive, Sergio P. Ermotti, wrote in a letter to shareholders. “While progress was made on many issues during 2012, many of the underlying challenges remain at the start of the new year.â€
Since taking over at the helm of th Swiss bank in 2011, Mr. Ermotti has been seeking to reduce costs by cutting jobs, shrinking capital intensive trading operations and repairing the bank’s reputation after a string of scandals.
In December, the bank agreed to pay $1.5 billion in fines for its role in a rate-rigging scheme, which also involved other banks and brokers, to manipulate the London interbank offered rate, or Libor, and other benchmark interest rates. The settlement followed an earlier fine for charges it had helped some clients avoid U.S. taxes.
UBS in October started to cut about 10,000 jobs as it retreats from some business lines and streamlines to focus more on its successful wealth management operation. Its investment banking operation was hit in 2011 by a $2.3 billion trading scandal that cost then-chief executive Oswald Grübel his job.
The bank said on Tuesday it “remains on track†with plans to reduce exposure to risky assets and cut costs. UBS said it has achieved 1.4 billion francs in net c! ost savings since the revamp started in the middle of 2011. As a result, it plans to increase its dividend payout for 2012 by 50 percent, to 0.15 francs a share.
UBS also announced it would change the way it pays bonuses to its senior bankers in order to link them closer to the firm’s performance. Bankers would have to give up deferred compensation if the bank’s capital ratio fell under a certain level.
The investment banking unit had a pretax loss of 557 million francs in the last three months of 2012 compared with a profit of 114 million francs in the same period a year earlier.
UBS’s wealth management unit reported net new money inflows declined to 2.4 billion francs, down from 3.1 billion francs in the fourth quarter of 2011, after Western European clients withdrew funds amid the crisis in the euro zone.
