UBS Sees Their Bad Year Get Worse With Trading Scandal, Woeful Results
UBS really can’t catch a break. In the last year they’ve harboured tax evaders, created a diplomatic spat with the US, cut 18,000 jobs, lost millions and millions of dollars, lost clients to other healthier banks, and seen their staff variously flee the company, go on the run, and have Swiss rappers perform mocking tracks outside their house. And now they’re having their name dragged through the mud via an illegal trading scandal.
It must be tempting when you got so much money passing through your coffers not to just quietly gamble with some of it, and so it proved to four UBS employees, who ignored the voice in their heads that said “are you actually doing this?” and went ahead and did it anyway. They were speculating in foreign commodities and currencies to the tune of up to 50 illegal trades a day in 2006 and 2007.
You may remember David Redmond, who earlier this year got drunk at a long boozy lunch then bet on some oil futures, only to see the price collapse. Even though he managed to turn a profit on the bet in the end (with a hangover!) he was still fired from Morgan Stanley and banned from working in the sector. The UBS miscreants however weren’t even any good at their bets – they lost £26m in the unauthorised trades. UBS had to pay all of that back to the wronged clients, and another £8m in fines.
This isn’t going to endear them to their clients, who, after the double whammy of potentially being named and shamed as a tax evader and working with a bank whose reputation is in tatters, are pulling millions from their UBS accounts and heading elsewhere. This loss of revenue is further damaging those already record losses – their third-quarter results, released earlier this week, show a loss of 564m Swiss francs. They’re trying to focus on rebuilding their investment banking unit to generate some stable profits – but with stories like the one above cropping up with worrying regularity, they’ve got an image problem that could be insurmountable.
Still, CEO Oswald Grubel isn’t looking glum, saying in a memo to staff yesterday: “We have made good progress until now, which makes me optimistic. I am confident we will continue to move forward”. But forward to where?
Photo: Ben30
Posted by Ben Beaumont-Thomas in Hot Money | November 6, 2009 12:08PM |