UBS Halves 2Q Profit on Facebook IPO Exposure

By FOXBusiness

UBS (NYSE:UBS) halved second-quarter earnings on lower trading revenue and commissions as well as significant exposure to Facebook's (NYSE:FB) botched initial public offering.

The Swiss bank lowered operating income to 6.4 billion Swiss francs from 7.1 billion a year ago, and profit attributable to shareholders to 951 million francs from 1.6 billion in 2011.

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UBS attributed some of the declines to the “mishandling of Facebook’s market debut” by NASDAQ that led to a loss of 349 million francs in its U.S. equities business.

The market maker said multiple orders for Facebook shares by clients were requested before Nasdaq finally confirmed the transactions, which meant UBS received far more shares than its clients demanded.

“UBS's loss resulted from NASDAQ's multiple failures to carry out its obligations, including both opening the Facebook stock for trading and not halting trading in the stock during the day,” UBS said in a statement.

The bank said it will take the appropriate legal action against the electronic stock exchange as it seeks compensation for the full extend of its losses. Shares of Facebook, which has also been struggling to get back on its feet following the May IPO, fell more than 6% and hit a new low of $21.61 on Tuesday.

Meanwhile, earnings in UBS’s global asset management group slumped to 118 million francs from 156 million francs in 2011 on lower performance fees. Retail and corporate profit fell to 399 million francs from 575 million francs last year on higher expenses.

UBS's investment bank swung to a loss of 130 million francs from a year-earlier profit of 383 million francs.

"Our strong capital, liquidity and funding positions, as well as our transparency and consistency in communicating these strengths, clearly speak in favor of UBS and reassure our clients in an otherwise adverse environment,” UBS chief executive, Sergio Ermotti, said in a statement.

The bank said it would continue to explore methods to improve efficiency, though it did not provide details on any plans. The bank is in the process of cutting about 3,500 jobs.

Also on Tuesday, rival Deutsche Bank (NYSE:DB) posted a sharp decline in quarterly earnings and said it planned to cut 1,900 jobs to save costs.