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To date, Irving Picard, the court-appointed trustee in charge of liquidating Bernard Madoff’s former hedge fund empire, has recovered around US$2bn for victims of the fraud. His latest victory, announced yesterday, is a US$500m settlement with Union Bancaire Privée, a Swiss private bank.

Image links to full complaint (2.2MB PDF)

Three other suits filed in recent weeks could net Mr Madoff’s former clients much, much more. On November 24th, the trustee filed a US$2bn suit against UBS, alleging misconduct and “collaboration in the Bernard Madoff Ponzi scheme.” On December 2nd, a suit seeking more than US$6bn was lodged against JPMorgan for allegedly “aiding and abetting Madoff’s fraud”. Most recently, a US$9bn suit was launched against HSBC on December 5th. Announcements of all suits and settlements can be found here; UBS, JPMorgan and HSBC all deny the claims.

The trustee’s 173-page complaint claims that HSBC was “always willing to play the lapdog” to Madoff. In filling in the details, the plaintiff unravels the byzantine structures of “feeder funds” linked to Mr Madoff’s firm. Mr Picard has filed suits seeking some US$35bn in damages, and some are growing bullish on his prospects for recovery.

Update (December 9th): Another seven banks were sued on Wednesday.

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For the first time in more than two years, Swiss banking giant UBS recorded a quarterly net inflow of funds at its asset management arm. Executives at the bank, however, were careful not to trumpet the development as an inflection point in the firm’s fortunes, even though the inflow came a quarter ahead of previous guidance.

The reserved reaction was also warranted because the rest of the bank’s third-quarter results were almost uniformly awful. Earlier, Swiss rival Credit Suisse released a similarly downbeat set of results, although not as uniformly gloomy as at UBS.

Read more at Financial Services Briefing: “Squeezed” (October 27th)

UBS’s latest quarterly results beat analysts’ expectations. More importantly—if only for pride’s sake—they also beat the results of local rival Credit Suisse.

Badly hit by the financial crisis, UBS has underperformed Credit Suisse for some time. Its recent reversal of fortune is largely thanks to a resurgence of its investment banking unit, the division primarily responsible for the group’s earlier downfall and government bailout. The bank is adding headcount in the division while it trims staff elsewhere in the group, most notably the client advisors in its beleaguered wealth management unit.

But as an analysis at the parent site argues, the short-term wisdom of riding the global recovery in investment banking activity may not extend to the longer term. Will wealth-management clients flock to the bank based on its strength in increasingly maligned business lines like derivatives trading?

Another day, another post about Swiss banks.

Today, Credit Suisse reported a healthy net inflow of funds—some Swfr12.5bn—at its wealth management division during the fourth quarter of last year. This made the unexpectedly large outflow at rival UBS over the same period look even worse than it already did. Credit Suisse’s achievement was even more noteworthy given that it lost Swfr5.6bn in assets declared by customers in response to a tax amnesty by the Italian government.

For a flat 5% fee, the amnesty offered Italians a chance to repatriate undeclared funds with no questions asked. The offer was originally scheduled to expire in December, but after some €100bn in funds were declared—generating a tidy windfall for government coffers—it was extended until the end of April this year.

The effect of the amnesty has weighed on Swiss banks, particularly since markets got wind of the size of repatriated assets via a December statement from the Italian finance ministry. Credit Suisse was the last large Swiss bank to report fourth-quarter results, as well as the most adept at keeping Italian customers’ funds under its control. The bank said that around 66% of the funds declared under the amnesty remained invested with the group, versus 63% at UBS and 60% at Julius Baer.

Persistent fund outflows at Swiss banking giant UBS have been a concern for some time. In the bank’s latest set of results, the problem appears to be getting worse, with net fund outflows at the wealth management unit accelerating sharply in the fourth quarter of 2009. (Full analysis can be found at this blog’s parent site; subscription required.)

Tax amnesties or the threat of forced repatriation have led many clients to withdraw funds from UBS’s storied Swiss private bank. For example, an Italian tax amnesty on undeclared funds accounted for a quarter of the outflow at the bank’s Swiss franchise in the fourth quarter. Meanwhile, a Swiss court’s refusal to transfer account information for some UBS clients to the US tax authorities threatens to reopen a thorny case the bank settled with Washington in the summer.

In its latest letter to shareholders, the bank’s management described 2009 as a “transformative” year. After so much change, shareholders must now decide whether they like what UBS has become.

As European banks report their latest quarterly results, many have benefited from robust investment banking business and inflows at wealth management units. UBS isn’t one of them.


The Swiss bank reported disappointing results today [subscription required], especially at its wealth management division. The traditional profit driver at the bank has seen a steady outflow of client funds after a damaging investigation into tax evasion by the American authorities tarnished the group’s reputation. Having settled with the authorities in August, the bank is now on the “long haul of restoring our reputation,” finance chief John Cryan said. The path will be “wobbly”, he added.

Private banking is currently one of the liveliest sectors in financial services [sub req], with banks scrambling for the wealth-management units put up for sale by the likes of ING and RBS. The accelerating outflows at UBS are in sharp contrast to swelling coffers at key competitors. Once one of the most venerable names in wealth management, UBS is the latest example of the management mantra about corporate reputations: hard to get, easy to lose.