Archive for November, 2008

UBS says finds some U.S. tax fraud cases (Reuters)

Thursday, November 27th, 2008 | Finance News

LUCERNE, Switzerland (Reuters) –
UBS said on Thursday it has discovered a few cases of tax fraud as part of a U.S. inquiry into whether it helped wealthy Americans dodge taxes through accounts in Switzerland.

"Our investigations have uncovered a limited number of cases of tax fraud under both U.S. and Swiss law," Chairman Peter Kurer told 2,400 shareholders gathered to vote on the bank raising 6 billion Swiss francs ($5 billion) with a convertible bond issue to the Swiss state.

Kurer, who took over in April, also said current and former top executives would give up 70 million francs in bonuses they received after coming under fire for accepting fat salaries despite steering Switzerland's flagship bank into heavy losses.

He reiterated that UBS, one of the hardest-hit banks in the subprime turmoil, still aimed to make a profit in 2009, but stressed market conditions remained difficult. UBS made a small third-quarter profit, mainly thanks to tax gains and accounting factors, but analysts expect it to take a new hit this quarter.

UBS is also under pressure from the U.S. tax investigation launched earlier this year, which led to the indictment of the bank's head of global wealth management this month and threatens to weaken Switzerland's precious banking secrecy laws.

But bank-client confidentiality, a pillar of Swiss banking, "is not there to protect cases of tax fraud," Kurer said, suggesting UBS could be ready to hand over some client details to U.S. authorities as part of a possible settlement.

The U.S. authorities are seeking the names of about 17,000 U.S. clients of UBS who have Swiss-based bank accounts. Swiss lawyers representing U.S. clients of UBS have said Switzerland is considering disclosing information on only a few hundred.


Kurer, who is trying to rebuild the bank's reputation after it was forced to write down about $49 billion on risky subprime assets, said UBS had taken broad measures to address its shortcomings, including aggressively reducing its balance sheet and overhauling its pay structure.

The chairman said he was personally replying to the many angry shareholders who had written to express their discontent with UBS, formerly an icon of Swiss banking whose stock used to be popular among Swiss retail investors.

Under the new pay system, the chairman will not get bonuses. Ex-Chairman Marcel Ospel, whose drive into investment banking many analysts blame for UBS's present woes, has also returned some of his pay, along with other executives.

"UBS is a leader in this regard," Kurer said, adding he was working on getting more bonuses waived or returned.

"Those who are responsible must be brought to court," said a 68-year-old UBS investor who lost much of his pension savings.

"I have lost nearly all what I and my wife had saved up for later years. What am I going to do now.?"

Kurer gave no details on to what extent UBS was stemming client money withdrawals, which totaled a record $49 billion in the third quarter in its core wealth management business.

UBS said earlier this month the pace of client outflows had started to ease after the Swiss government announced its rescue package. The deal also allows UBS to hive off up to $60 billion of illiquid assets in a special central bank-controlled fund.

He said the Swiss government intervention -- including the 6 billion francs of new capital the shareholders approved on Thursday, "has helped bolster confidence in UBS and the Swiss banking and financial services industry as a whole."

UBS shares, which have lost more than two thirds of their market value this year, rallied 4 percent earlier on Thursday, but later trimmed gains. They were up 2.4 percent at 15.16 Swiss francs at 8:07 a.m. EST, when the DJ Stoxx European banking sector index was up 2.5 percent.

"Kurer's forecast that 2009 will be profitable may help. But he has also warned that the situation could get worse," said a trader.

($1=1.199 Swiss francs)

(Editing by Greg Mahlich)


World stocks hit 2-week highs (Reuters)

Thursday, November 27th, 2008 | Finance News

LONDON (Reuters) –
Global stocks hit two-week highs on Thursday with European equities playing catch up to strong gains overseas, but more grim economic reports briefly sent government bond yields in Europe to a fresh three-year low.

Trading though is seen lackluster with Wall Street staying shut for the Thanksgiving Day holiday.

Renewed expectations that Washington will bail out the U.S. motor industry and China's aggressive interest rate cut on Wednesday had helped lift some of the gloom surrounding the global economy.

But there was no shortage of bleak news with two of Britain's high profile retailers DSG and Kingfisher posting downbeat results and weak outlooks, while a report showed euro zone economic sentiment plunged to a 15-year low this month. See

A string of dismal U.S. economic reports this week has also caught up with the dollar, pushing it lower against a basket of major currencies, while political risk emerged after attacks in India's financial capital.

More than 100 people have been killed with scores more trapped by Islamist gunmen in Mumbai after attacks on luxury hotels, hospitals and a landmark cafe.

(For details please double click on)

For now though, stocks are eking out gains. The FTSEurofirst 300 index of top European shares rose 1.9 percent, Britain's FTSE 100 index put on 1.4 percent and Germany's DAX climbed 1.6 percent.

This followed gains of 2 percent for Japan's Nikkei, 2.4 percent for MSCI's measure of other Asian stock markets. On Wednesday, the U.S. Dow Jones industrial average rallied 2.9 percent.

MSCI world equity index climbed 0.9 percent to 217.82, having earlier reached a peak of 218.46 -- a level last seen in November 14.

"There is cash about. In asset allocation terms, people are very underweight equities and there may be a number of cases so far underweight that they've got to put money to work in the equity market ... ahead of month end," said Marc Ostwald, strategist at Monument Securities in London.

Meanwhile, the dollar eased 0.2 percent against a basket of major currencies.

"The greenback for long the beneficiary of safe haven flows has over the past couple of days been forced on the defensive as poor economic news weighed on the market," said Mitul Kotecha, head of global foreign exchange strategy at Calyon.

"Yesterday's data releases added to these woes, showing a huge drop in durable goods orders, a decline in personal spending, a weak Chicago PMI and another big increase in initial jobless claims. The latter points to a USD unfriendly non-farm payroll report next Friday."


European government bond yields reversed early gains with the 10-year slipping to a fresh three-year low in the wake of data showing a drop in economic sentiment as well as inflation expectations among companies and households.

"Given this backdrop, there is clearly scope for the ECB to deliver a sizeable interest rate cut next Thursday," said Global Insight's chief European and UK economist Howard Archer in a note.

The 10-year euro zone government bond yield fell as low as 3.26 percent, a level last seen in January 2006, before climbing back to 3.282 percent, little changed on the day.

On Wednesday, the U.S. benchmark 10-year yield hit a 50-year low below 3.0 percent after a flood of bleak U.S. economic reports spurred demand for safer government debt.

U.S. crude oil slid more than $1 toward $53 a barrel, reversing some of the 7 percent gains a day earlier as investors fretted about falling demand.

Recent data showed U.S. crude stocks rose sharply last week and U.S. September demand fell to its lowest level for any month in more than a decade.

In the interbank money market, more signs of year-end funding strains have started to emerge with one-month dollar and euro London interbank offered rates (Libor) both jumping.

(Additional reporting by Kirsten Donovan; A)


UK electronics retailer DSG posts 1H net loss (AP)

Thursday, November 27th, 2008 | Finance News

LONDON – DSG International PLC, Britain's largest consumer electronics retailer, posted a net loss for the first half of the year on Thursday, after the company cut prices to compete with internet retailers and spent more on restructuring the business.

The company, which owns chains PC World and Currys, reported a net loss of 40.3 million pounds ($62.4 million) during the 24 weeks through Oct. 18, and suspended its dividend payment. Over the same period a year earlier, the company made a net profit of 37.2 million pounds.

DSG said that the loss was partly the result of 27.8 million pounds of net restructuring charges, including the reorganization of its head office.

Its profit margin also took a hit, as the company slashed prices on televisions to align them with the prices consumers could find on the internet.

Revenue for the first half rose slightly — by 2.7 percent — to 3.47 billion pounds, boosted by beneficial exchange rates.

At constant exchange rates, however, sales were down 4 percent year-on-year.

DSG's market value has fallen by nearly 90 percent this year on analyst concerns that falling consumer demand amid the economic downturn and the company's outdated business model, which relies on store sales in the age of online shopping, would push the company into the red.

Shares fell 5.4 percent to 13 pence in London on Thursday.