UBS set for hit of at least $539 million after tax penalty, Banking News & Top Stories

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PARIS (BLOOMBERG) – UBS Group is facing a fourth-quarter hit of at least 350 million euros (S$539 million) related to a French tax case and could see a much bigger impact on profit if it decides not to fight on.

The Paris court of appeals on Monday (Dec 13) upheld a 2019 finding that the Swiss bank had illegally laundered funds by providing customers with a range of services to hide assets from tax authorities. It ordered the firm to pay a 1.8 billion-euro penalty, including a confiscation order of 1 billion euros and damages of 800 million euros.

Both UBS and French prosecutors have until Monday to appeal the decision, which saw the fine cut by more than half from an earlier record penalty of 4.5 billion euros.

The Swiss lender said that it’s reviewing the decision and considering all options, including lodging a further appeal at France’s top court. The bank is expected to take at least 350 million euros in provisions to add to the 450 million euros it has already set aside to cover the cost of the litigation, according to a person with knowledge of the matter.

The 800 million euros “will be payable upon request by the French state,” UBS said in a statement late Monday. If UBS decides not to appeal, it would need to take a further 1 billion euros in provisions in the fourth quarter to cover the cost of the confiscation order. That would mean 1.35 billion euros in additional provisions. The bank is expected to post pre-tax income of $1.4 billion, according to Bloomberg estimates.

UBS declined to comment.

The bank is analysing whether an appeal would delay payment of the confiscation order and its chances to have the order thrown out in France’s high court, according to two people familiar with the considerations. It remains unclear whether the confiscation order – which came as a surprise to UBS lawyers as well as prosecutors – is immediately payable or can be stalled by an appeal, the people said.

The bank is also considering appealing to try and reduce the damages and weighing the ramifications of accepting a guilty verdict for money laundering on its global operations, the people said.

Not wanting to accept guilt during early negotiations on a settlement was one of the key reasons why the bank went to court. While UBS believes it has legal arguments to challenge the penalty, the board may decide to take the hit to avoid prolonging a case that’s plagued it for seven years, one person said.

The court case was pursued under former chief executive Sergio Ermotti, who has since been replaced by Ralph Hamers. Chairman Axel Weber will also leave in coming months and be replaced by ex-Morgan Stanley banker Colm Kelleher.

The full text of the verdict is expected to only be made available to the parties on Dec. 17 and they have until midday Dec. 20 to announce an intention to appeal.