In France, UBS is fighting billion-dollar charges vehemently. The move could put considerable heft on the Swiss bank's shareholders.
Three days: that's how long UBS' lawyers under chief counsel Markus Diethelm have to convince a Parisian criminal court overseen by judge Christine Mée. On Thursday, a hearing period in a high-stakes criminal case that French prosecutors have brought against the Swiss bank ends.
French prosecutors are demanding 3.7 billion euros ($4.2 billion), while France as a civil complainant is seeking another 1.6 billion euros in recompense. UBS' high-flying lawyers are contesting the financial demands, arguing lack of proof of a criminal act.
Years More in France?
What happens after Thursday? Nothing much – both sides are in for a long wait until the ruling is disclosed early next year. And even then, the ruling may not be the final word on France vs UBS. The Swiss bank could appeal the decision, prolonging the fight.
«This could result in the trial lasting several months if not years, given past precedent», Morgan Stanley analyst Giulia Aurora Miotto wrote in a recent note.
Not happy news for UBS shareholders – especially since UBS is also vulnerable on a second front, in the U.S. There, prosecutors filed a civil complaint against the bank for its business with crisis-era housing securities, as finews.com reported. UBS reportedly rejected a $2 billion settlement offer from the U.S.
Continued Uncertainty
Investors are taking UBS' newfound appetite for a fight coolly: the stock shed 1 percent last week. While analysts from Kepler Cheuvreux applauded UBS' standing up to the charges, Morgan Stanley's brokers said the bank's stance against U.S. prosecutors is unfavorable for the share price for now (the U.S. investment bank had previously expected UBS to set aside the RMBS scandal this year).
Morgan Stanley's analysts now fear that the proceedings will drag on for another year. This is based on the case of British bank Barclays, which also initially rejected a settlement before in April finally agreeing a «mere» $2 billion penalty in the U.S.
Share Buyback Hit?
In UBS' case, the delays could also reduce the bank's ability and appetite for share buybacks (UBS is 650 million Swiss francs, or $646 million, into a 2 billion franc buyback), the analysts argue.
There is a price for UBS' chutzpah against the two investigations – provided the bank is found not to have violated either French or U.S. laws: shareholders are paying for UBS' legal gamble on a lower financial penalty with continued uncertainty.
