By John Letzing
ZURICH-- UBS AG said Friday that it hasn't taken a significant
hit to its trading revenue as a result of the Swiss National Bank's
abrupt scrapping of a cap on the value of the country's currency,
though Switzerland's biggest lender is widely expected to suffer a
related decline in profit.
In a statement, Zurich-based UBS said that despite volatility in
exchange rates following the central bank's decision last week to
remove a cap on the franc, which allowed the currency to suddenly
jump in value relative to the euro and the dollar: "In aggregate,
UBS did not experience negative revenues in its trading businesses
in connection with the announcement." The franc initially shot up
by about 30% in value relative to the euro, and remains far above
the previous cap level of 1.20 francs.
UBS added that it plans to elaborate further when it releases
financial results next month.
The SNB had for years staunchly defended its cap on the franc as
a means to help the country's export-reliant economy and keep
prices for Swiss-made goods in check. That made its sudden policy
change on Thursday of last week a surprise that caused turmoil for
market players around the world.
UBS's announcement follows a similar statement from rival Credit
Suisse Group AG. Zurich-based Credit Suisse said earlier this week
that it didn't suffer "material" trading losses as a result of the
central bank's policy change.
However, more attention has been focused on the foreign-currency
trading business at UBS, which is significantly larger than that
the big bank's Swiss rival.
Both big banks are expected to see an impact on their
profitability as a result of the currency swing, however. That is
because both derive a significant portion of their respective
incomes in euros and dollars, which have sharply declined in value
relative to the franc, and report their financial results in
francs. Analysts at Morgan Stanley have estimated that UBS could
see a 16% cut to its reported earnings-per-share as a result of the
change in currency value.
UBS shares have fallen nearly 11% since the day of the SNB's
policy change, while shares of Credit Suisse have fallen about
15%.
The sudden increase in the value of the franc has already
spurred a number of Swiss banks to take related actions. Credit
Suisse said recently it would start charging large institutional
and corporate clients that maintain franc accounts, while Lombard
Odier Group, a private bank in Geneva, this week began charging a
0.75% fee on cash accounts with more than 100,000 francs. Zuercher
Kantonalbank, the largest of Switzerland's banks owned by
individual cantons, which are similar to states, said yesterday it
would start charging some clients to hold franc accounts.
Julius Baer Group AG, a Zurich-based bank focused on managing
portfolios for wealthy clients, said earlier this week it didn't
suffer losses in the two trading days following the central bank's
policy change. The bank said it expects to be able to "defend" its
profitability. Julius Baer's shares have fallen nearly 19% since
the day the SNB's policy change was unveiled.
Neil MacLucas contributed to this article.
Write to John Letzing at john.letzing@wsj.com
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