UBS has warned over the impact of the surging Swiss franc and negative interest rates in Switzerland and the eurozone. As Ciara Lee reports it sent its shares down more than 3 percent in early trade.
Shares tumbled three percent despite a promise of the biggest payout to shareholders since the financial crisis. What's rattling UBS investors is a warning from the bank over the surging Swiss franc and negative interest rates in Switzerland and the eurozone. UBS has had a solid start to 2015. But Switzerland's biggest bank said the sudden move by the central bank to abandon a cap on the franc, will make life difficult for financial firms and exporters. Jeremy Stretch is Head of Currency Strategy at CIBC. (SOUNDBITE) (English) JEREMY STRETCH, HEAD OF CURRENCY STRATEGY AT CIBC WORLD MARKETS, SAYING: "If we are going to see those punitive negative interest rates being maintained for a prolonged period, then that may well suggest that we see investors maybe reconsidering depositing or maintaining of investments in Switzerland. So that could enourage deposit, or if not deposit flight, certainly a reduction in the level of deposit and that is really going to crimp the ability of the banks to do business." The warning comes as the bank announced better than expected fourth quarter net profit of more than a billion dollars. But profits fell at all of the Swiss lender's units except its investment bank. Results last year were hit by more than 1 billion dollars used to settle past scandals. In November, UBS agreed to pay over seven hundred million francs to British and Swiss authorities and a U.S. regulator to settle a probe into the attempted manipulation of foreign exchange rates. And last summer it faced a near 300 million dollar charge mainly to settle claims it helped wealthy Germans dodge taxes. Now it's facing a new inquiry - U.S. authorities are investigating whether it violated U.S. tax laws