UBS, the largest bank of Switzerland announced that it is apportioning an additional amount of nearly $400 million to its already announced legal provisions on Friday. The bank had been slapped with a huge fine last month of 4.5 billion euro ($5.09 billion).
UBS has already appealed against the court decision in a higher court and has also expressed its expectations that an appeals court will ”correct the mistakes” that had been made in the earlier ruling that resulted in the fine. The bank has also said that it would now set aside a total 450 million euros ($516 million) as possible expenses in relation to court cases and possible fines against it over charges against it of having illegally soliciting cross-border clients and then engaging in money laundering the money from tax frauds.
“In light of the first judgment and considering the full range of potential final decisions, the provision on our balance sheet reflects our best estimate of possible financial implications,” the group’s chairman and CEO said in a joint letter to shareholders. “That said, we still believe the verdict should be reversed, at which time we would release the provision,” he added.
Analysts believe that it is an unusual measure that the bank has taken when considering the amount of money that it has decided to set aside for just one specific case. There is also an eagerness among shareholders and analysts to get some clarity from the bank about what it expects would be the most likely outcome now that the fine that has been imposed by the lower court in France is a record amount for the country in terms of penalties and one that has been way above expectations.
It is anticipated that it would take years to complete the appeals process and it could also result in the bank and prosecutors having to negotiate through at least two more verdicts by the courts. .
UBS announced on Friday that the bank had increase its litigation provisions for the entire group to $2.83 billion from the $2.45 billion that it had initially reported for end-2018m even though the bank has not made any specific comments or identified the exact amount that it has set aside for the court case in France.
The bank also said that the profits of the bank for 2018 were reduced to $4.5 billion from the $4.9 billion that it had reported in January because of accounting for the legal provisions.
In order to assess the impact of the ruling of the French court on its finances, UBS had pushed back the release date of its annual report. The bank also wants to determine whether it would need to bulk up litigation provisions.
(Adapted from TheStar.com)