Sanction shocker delays UBS valuation upgrade
The author is a Reuters Breakingviews columnist. The opinions expressed are their own.
LONDON, Sept 27 (Reuters Breakingviews) -Sergio Ermotti can’t shake off the past. That’s one lesson from the $3 billion slide in market value for his bank UBS UBSG.S on Wednesday. The fall came after Bloomberg reported that the U.S. Department of Justice has stepped up scrutiny of possible compliance failures that helped Russian clients evade sanctions. The report says that the DOJ is launching a full-scale investigation into Credit Suisse, which UBS now owns after a state-backed rescue in March.
At first glance the 3% selloff seems steep. UBS has about $6 billion of provisions set aside for legal and regulatory bills, suggesting shareholders are well protected against Credit Suisse’s historic nasties. But the theme of lurking dangers is nonetheless problematic for Ermotti. After Wednesday’s slide, UBS’s share price is almost exactly in line with its most recent tangible book value per share, compared with a roughly 30% premium back in early March. The implication is that investors are less excited about UBS’s prospects after incorporating Credit Suisse than they were about its standalone story. Ermotti may disagree, but further ghosts from the past won’t help his case. (By Liam Proud)
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