UBS pays millions to settle US mortgage mis-selling claim

UBS, the Swiss bank that employs thousands of people in the City, has agreed to settle a multimillion-dollar legal case brought against it for selling mortgage-based investments which went bad in the financial crisis.

The bank said it had reached agreement in principle with the US Federal Housing Finance Agency to settle claims related to mortgage-backed securities it issued between 2004 and 2007.

It did not disclose the scale of the settlement but revealed a Sfr865m (£602m) charge for litigation, provisions and writedowns in the three months to June. It said the full cost of the settlement had been covered by this and previous money it had set aside.

UBS is one of 18 banks and financial institutions being pursued by the US regulator on behalf of the US mortgage giants Fannie Mae and Freddie Mac. Citigroup and General Electric have already settled for undisclosed amounts. Among those still to reach a deal are Royal Bank of Scotland, Barclays, Bank of America and Goldman Sachs.

UBS also said that it expects its second-quarter after-tax profit to be around Sfr690m, up from Sfr425m a year ago. That was well ahead of analysts’ forecasts.

The bank said it had taken a Sfr100m charge in its wealth management division as a result of the Swiss government’s deal with UK tax authorities to track down tax avoiders. Swiss banks face total losses of some Sfr500m from money they have agreed to pay to the UK taxman.

UBS said that its decision to focus on wealth management and reduce its investment banking and asset management involvement, with the loss of 10,000 jobs, had resulted in net inflows of Sfr10.1bn in its private banking business, inflows of Sfr2.7bn in its US wealth management division, and outflows of Sfr2bn from global asset management in the latest quarter.