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.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Content Writer - Global Financial Services

£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Web Developer - PHP

£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Loan Underwriter

£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

Day In a Page

A nap a day could save your life - and here's why

A nap a day could save your life

A midday nap is 'associated with reduced blood pressure'
If men are so obsessed by sex, why do they clam up when confronted with the grisly realities?

If men are so obsessed by sex...

...why do they clam up when confronted with the grisly realities?
The comedy titans of Avalon on their attempt to save BBC3

Jon Thoday and Richard Allen-Turner

The comedy titans of Avalon on their attempt to save BBC3
The bathing machine is back... but with a difference

Rolling in the deep

The bathing machine is back but with a difference
Part-privatised tests, new age limits, driverless cars: Tories plot motoring revolution

Conservatives plot a motoring revolution

Draft report reveals biggest reform to regulations since driving test introduced in 1935
The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory