UBS reports Q2 profit of $734 mn

UBS is exceeding analysts' profit estimates for a second quarter in a row after CEO Sergio Ermotti announced 10,000 job cuts last year

Swiss banking giant UBS said on Monday it had settled a lawsuit linked to US subprime housing mortgages which sparked the 2008 global financial crisis. The bank did not specify how much the settlement amounted to, but said it has set aside 865 million Swiss francs ($922 million) in the second quarter to meet litigation costs including the case.

UBS and 17 other financial institutions were sued by the US Federal Housing Finance Agency in September 2011 for violating federal securities laws when selling residential mortgage-backed securities to government-backed lenders Fannie Mae and Freddie Mac. The agency accused the 18 firms of misleading Fannie and Freddie about the credit-worthiness of the assets. "UBS has reached an agreement in principle with the Federal Housing Finance Agency," UBS said.

Despite setting aside massive provisions, the bank, which is due to announce its second quarter results on July 30, said it would post a net profit of around 690 million francs ($734 million) for the three months ending June. That is a jump of 62.5 per cent from a year ago and a stark improvement over the first quarter, when net profit slid 4.5 per cent. In the fourth quarter of 2012, UBS posted a loss of 1.9-billion francs. The bank said its operating profit before tax would reach about 1.02 billion francs, an increase of 7.3 per cent over the second quarter in 2012.