UBS avoids trading losses after Swiss franc decision

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UBS did not suffer trading losses in the turmoil that swept through global markets after the Swiss National Bank’s decision last week to abandon its cap on the franc.

Switzerland’s largest bank said on Friday that although the central bank’s unexpected decision caused considerable foreign exchange volatility, ”in aggregate, UBS did not experience negative revenues in its trading businesses in connection with the announcement”.

The franc soared in the aftermath of the SNB’s move, briefly rising as much as 39 per cent against the euro, sending shockwaves through markets, and hitting foreign exchange brokers particularly hard.

UK-based Alpari filed for administration on Monday after its clients sustained heavy losses, while US-based FXCM had to accept a $300m lifeline from Leucadia National after concerns that it would breach capital requirements.

So far, Switzerland’s big banks appear to have avoided the worst of the tumult. Credit Suisse said on Wednesday that it had “recorded positive trading results over the period following the SNB announcement, not having suffered any material trading losses relating to the foreign exchange volatility”. Julius Baer issued a similar statement on Monday morning.

The SNB has come under fire both in Switzerland and abroad for the manner in which it abandoned the cap, making its announcement in the middle of trading on Thursday morning, and only three days after a top official had said that the cap was central to SNB policy.

UBS did not comment on the merits of the SNB’s move. However, Axel Weber, UBS’s chairman and former head of Germany’s Bundesbank, said earlier this week that the SNB had made the right decision. “Better an end with a shock, than shocks without end,” he said at the World Economic Forum in Davos.

UBS said that it would provide more information about its prospects for the coming quarter when it presents its full-year results on February 10.

The bank also confirmed that it would return 0.25 francs per share to investors, having completed a share exchange to set up a holding company, UBS AG. The bank said that setting aside cash for the payout had cut its core tier one capital by about SFr1bn at the end of 2014.

“Subject to shareholder approval, UBS Group AG intends to pay the supplementary capital return upon successful completion of the squeeze-out procedure,” the bank said, reiterating that the payout was in addition to its normal dividend.

UBS also said that it would reshape part of its bonus scheme so that its “deferred contingent capital plan” would count as tier one rather than tier two capital in future.

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