Swiss bank UBS AG says it is close to a deal with U.S. regulators to resolve litigation related to mortgage securities issued in the years running up to the financial crisis.
UBS said Monday it has reached an agreement in principle with the U.S. Federal Housing Finance Agency (FHFA) to settle claims relating to offerings of U.S. residential mortgage-backed securities (RMBS) between 2004 and 2007. The bank didn’t disclose the expected size of the settlement, although it says that it has fully provisioned for it.
“The settlement, which is subject to documentation and final approvals by the parties, would encompass pending RMBS-related litigation brought by the FHFA against UBS on behalf of Fannie Mae and Freddie Mac as well as certain unasserted claims. The full cost of the settlement is covered by litigation provisions established by UBS during the second quarter of 2013 and in prior periods,” it says.
At the same time, the bank also released estimates for the second quarter, indicating that its pre-tax operating profit was approximately 1 billion Swiss francs ($1.1 billion), and its net profit was approximately CHF 690 million. These results include pre-tax charges of approximately CHF 865 million for all litigation matters, certain other significant provisions, and an impairment of financial assets, it says.
“We will report strong net new money in our wealth management businesses with net inflows of approximately CHF 10.1 billion in wealth management and net inflows of CHF 2.7 billion in wealth management Americas, with net outflows of CHF 2.0 billion in global asset management,” it says.
It also says that its Basel III common equity tier 1 ratio is expected to improve significantly to approximately 11.2% on a fully applied basis. The bank is slated to release its full financial report for the second quarter on July 30.
($1=CHF 0.91)