I’ve been following developments today in the UBS $2 billion rogue trades scandal – and the latest news re an arrest of the alleged rogue trader in London today – which could lead the Swiss bank group to report a financial loss for the third quarter of 2011.
Visiting the UBS online newsroom, I was puzzled by an entry posted this morning entitled simply ‘Media Release’ as you can see in the screenshot:
Click on the ‘More‘ button, and you see this:
The ‘More’ button reveals this text:
Zurich/Basel, September 15, 2011, 08:54 AM
UBS has discovered a loss due to unauthorized trading by a trader in its Investment Bank. The matter is still being investigated, but UBS’s current estimate of the loss on the trades is in the range of USD 2 billion. It is possible that this could lead UBS to report a loss for the third quarter of 2011. No client positions were affected.
Extraordinary – it looks very much like whoever wrote or published the news release was trying to hide the information behind a generic headline, perhaps hoping no one would really notice it. Look at all others releases in the UBS online newsroom – normal story titles as you’d expect. All but this exception.
No doubt there’s an innocent reason such as I’ve speculated. Yet there could be serious consequences nevertheless from this behaviour, perhaps in areas related to full and fair disclosure of information likely to affect the share price or otherwise affect investors’, shareholders’ and the wider financial community’s trust in the company, not to mention customers’.
And I’d be surprised if there weren’t Swiss or US financial industry regulatory matters that would embrace this, given that the company’s shares are listed on stock exchanges in Switzerland and the USA.
It adds up to a reputation crisis at the very least.
[Update Sept 16] Some of the repercussions I’ve seen reported since yesterday:
Financial Times Sept 15: Trader hinted at turmoil in Facebook posts
When Kweku Adoboli typed a short update on Facebook last Tuesday, he might have been referring to troubles other than a mounting trading loss at UBS.
“Need a miracle,” he wrote.
But the idea that it may have meant the 31-year-old knew he was in trouble provoked pity and shock among friends and acquaintances on Thursday, after he was arrested in connection with a $2bn fraud at the bank where he was a trader.
BBC News Sept 16: UBS did not notice Adoboli’s £1.3bn loss
[…] The disclosure that it was Mr Adoboli’s decision to inform his colleagues of his actions that set alarm bells ringing at UBS, rather than its own monitoring system, will add to concerns that investment banks simply aren’t capable of controlling the huge risks that their traders take.
UBS estimates that Mr Adoboli’s alleged unauthorised trading will cost the bank around $2bn (£1.3bn) and will more than wipe out the giant bank’s profits in the current three-month period.
If Mr Adoboli had not revealed his activities on Wednesday, in theory the final bill for UBS could have been even bigger.
Financial Times Sept 16: UBS bankers face zero bonuses
[…] Hundreds of UBS bankers could receive zero bonuses this year following the revelation that a 31-year-old trader at the Swiss group is suspected of losing $2bn through unauthorised trades.
[…] Analysts said that while UBS has enough capital to withstand the financial impact of a $2bn hit, such a massive trading loss could effectively wipe out any profits from its investment banking operations for 2011.
Over the first half of the year, UBS has earned a pre-tax profit of SFr1.2bn ($1.37bn) in its investment bank unit, headed by Carsten Kengeter.
A $2bn trading loss, which UBS said could push the entire group into the red for the third quarter, means the investment bank is sitting on a $650mn hole.
Expecting more bad news to emerge in the coming days.