Summary
- UBS shares rise 2% after court reduces fine
- Court verifies money laundering allegation
- UBS to decide whether to appeal the ruling in Supreme Court
On Monday, a Paris appeals court slashed the penalty to be paid by UBS (UBSG.S) for allegedly helping wealthy clients in France evade taxes to 1.8 billion euros ($2 billion). Nonetheless, the same court upheld that the Swiss bank was guilty of both developing illegal banking services and money laundering.
Compared to an overall fine of 4.5 billion euros imposed against the bank after the first trial in 2019, the new and revised penalty is less than half, and shares in UBS rose more than 2% after the December 13 verdict.
However, the bank had anticipated seeing the charges tossed by the appeals court, particularly the money laundering allegation because of the potential reputational damage. It said that it would rapidly and quickly decide on whether to appeal against the ruling with France’s Supreme Court.
After the verdict, Herve Temime, a lawyer representing UBS said:
“The bank takes note of this decision. Compared to the first instance ruling, there is a financial gain of 2.7 billion euros, but it is a criminal conviction and therefore we will make our decision very quickly.”
Historically, fines for tax-related and other offenses have been lower in Europe than in the United States, with the UBS case marking an exception that has been closely watched by other banks.
The appeals court found UBS guilty of lobbying clients illegally at sporting events and parties in France, and also for laundering the proceeds of tax evasion, confirming the verdict of the 2019 trial. In connection with this case, UBS has already set aside 450 million euros in provisions.
Assuming the bank does not appeal the verdict, Citi analysts said it was likely to book another $1.5 billion charge in the fourth quarter of this year. Furthermore, it said that such a scenario would leave the bank with some $4.2 billion of excess capital, placing it “in a strong position to announce bigger (share) buybacks with the full-year results and strategy update on 1 February.”
Even with whistleblowers coming forward, lawyers who represented the bank had argued in the appeals trial that investigators had never found clear evidence of systematic attempts by UBS sales consultants to shield French customers, including at client events like cocktail parties and hunts.
The original verdict was disproportionate, the bank argued.
($1 = 0.8865 euros)
