Swiss lender UBS Group (NYSE:UBS) has been slapped with a nearly $400 million fine by the U.S., U.K., and Swiss banking authorities for actions taken by its recently acquired subsidiary, Credit Suisse. UBS is feeling the pinch from the forced acquisition as it begins clearing up the mess created by the beleaguered banker.
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Credit Suisse was hit with over $5 billion in losses from its relationship with hedge fund Archegos Capital Management when it collapsed in 2021. The Federal Reserve stated that Credit Suisse undertook “unsafe and unsound counterparty credit risk management practices” in its dealings with Archegos. The Fed fined UBS $268.5 million for Credit Suisse’s misconduct, while the remaining fine was charged by the Bank of England’s Prudential Regulation Authority.
Reportedly, Credit Suisse was offering preferential treatment and adhering to inadequate monitoring procedures for Archegos through its prime brokerage division. Archegos had taken exorbitant exposure to specific stocks, which led to its failure when the stock prices started plunging in 2021. Several Wall Street banks were lending to Archegos and took a hit from its failure, including UBS.
The Swiss government-orchestrated takeover of Credit Suisse is beginning to hurt UBS. The banking giant is said to be implementing its “operational and risk management discipline” across all divisions. UBS has set aside approximately $4 billion to resolve Credit Suisse’s outstanding legal issues. Plus, recently, the bank announced a 50% workforce reduction for Credit Suisse staff.
Is UBS a Good Stock to Buy Now?
On TipRanks, UBS stock has a Moderate Buy consensus rating based on seven Buys, four Holds, and one Sell rating. The average UBS Group price forecast of $26.55 implies 23.9% upside potential from current levels. Meanwhile, UBS stock is up nearly 16% year-to-date.
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