UBS settles $1 bln mortgage probe, profits up in Q2

UBS said it settled a Federal Housing Finance Agency lawsuit over soured mortgage investments, taking an 865 mln Swiss franc ($919.63 mln) charge against second-quarter earnings for litigation, impairments and other provisions.

The Swiss bank, which reports the full quarter on July 30, said its net profit was 690 mln francs, from 425 mln francs year-ago. It didn't disclose the specific charge to settle the mortgage probe.

Analyst consensus for the quarter's net profit is 558 mln francs, according to Thomson Reuters data. The shares rose 2.7% in pre-market indications; trading begins at 0700 GMT.

UBS said net new money was 10.1 bln francs for the quarter at its flagship private banking arm and 2.7 bln in its U.S.-based brokerage, but that its asset management arm suffered 2 bln francs in outflows.

The result shows that UBS's private bank, which attracted the most customer money in six years last quarter, continues to thrive. The unit is the centerpiece of UBS's strategy following exits from large parts of the fixed income business – including cutting 10,000 jobs across the bank.

UBS, the largest private bank in the world, is seeking to reinvent itself following a series of scandals, including a $1.5 bln penalty for manipulating Libor and other benchmark interest rates.

The U.S. settlement comes shortly after UBS and thirteen other banks sued by the FHFA, which regulates Fannie Mae and Freddie Mac after the two mortgage finance companies were placed into federal conservatorship at the height of the 2008 financial crisis, lost a bid to have a U.S. appeals court intervene in their cases based on what they called a judge's "gravely prejudicial" rulings.