UBS reveals how it lost pounds 90m in `one-off' error

Union Bank of Switzerland yesterday spelt out how it lost almost pounds 100m in equity derivatives trading. Nigel Cope, City Correspondent, reports on a trading debacle that has already claimed four scalps this week.

UBS revealed for the first time yesterday the extent of the losses suffered in its equity derivatives business. It said the losses in the first half of this year were SFr200m (pounds 90m), but added that the incident was a "one off".

Werner Bonadurer, head of UBS's trading and sales and risk management services, said: "I am very confident this was a one-off event. Our controlling structure is very good." Mr Bonadurer said the losses in the first half were caused by valuation adjustments due to a change in UK tax laws and by a "calculation error" in one of its options pricing models that led to increased hedging costs.

UBS had left markets guessing earlier this year when its first half report to shareholders said equity derivatives turned in an "unsatisfactory performance" but failed to quantify the problem.

The bank said it was moving to lessen the chances of any repeat of the affair by centralising proprietary trading in equities.

The derivatives losses have claimed the jobs of three traders at the bank's New York office. In addition, Hans-Peter Bauer, the bank's head of fixed income, currencies and derivatives, has replaced Ramy Goldstein in charge of the London derivatives operation.

The scant details yesterday came as UBS announced an upbeat forecast for its full-year performance but disappointed investors by failing to announce a long-rumoured "blockbuster" takeover deal.

Speaking at the bank's annual autumn conference, Mathis Cabiallavetta, chief executive, said the bank had been frustrated in its bid for a big takeover in asset management and private banking services. "The time was not right for the major acquisition which many people expected," he said. He added that UBS had studied a range of opportunities including Scudder Stevens & Clark, the US asset manager snapped up by insurer Zurich Group in June. But it had decided not to pursue any of them.

Analysts said the comments could be interpreted as saying that UBS had abandoned, for now, ambitions of a big deal.

The bank, however, yesterday did announce a smaller deal to buy Alfi Gestion, the French asset manager, for Fr358m (pounds 36.5m). Alfi Gestion has 80 staff and manages assets of around Fr30bn.

The size of the deal disappointed analysts who had been hoping for a statement on the Liechtenstein-based LGT which has said it is selling its global asset management business, with $65bn in client funds, in order to concentrate on private banking. "We had expected something on LGT and there was all this talk of Merrill Lynch and they go and buy a French boutique," one trader said.

Mr Cabiallavetta said that trading results in the first nine months were 8 per cent higher than last year. He forecast that UBS would post net profits of around SFr3.2bn for the full year. That would compare with a SFr348m loss last year.

News
peoplePaper attempts to defend itself
Voices
voicesWe desperately need men to be feminists too
Life and Style
food + drink
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

IT Project manager - Web E-commerce

£65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits