Recently, UBS AG (UBS - Free Report) – Switzerland’s largest bank in terms of assets – reached a settlement with investors who charged it of misleading them with regard to the financial position of Lehman Brothers Holdings. UBS AG shelled out $120 million to settle the lawsuit.
The primary settlement of the class action lawsuit was filed in the U.S. District Court in Manhattan. The plaintiffs had accused UBS of ambiguous behavior related to the underwriting and sale of structured notes, worth roughly $900 million in the period between Mar 2007 and Sep 2008. On Sep 15, 2008, Lehman collapsed and filed for bankruptcy.
Most of these securities were Principal-Protected Notes. This meant that some or the entire principal amount of the notes was an absolute obligation of Lehman, even though the notes' return was subject to market conditions.
UBS AG’s litigation overhangs have been a common problem for the bank since the financial meltdown. However, the Swiss banking giant is taking steps to resolve such litigation overhangs at the earliest. Earlier this month, it agreed to a settlement worth $49.8 million with the U.S. Securities and Exchange Commission (SEC) to compensate investors for misleading them regarding the housing market related collateralized debt obligation (CDO).
Last month, UBS AG settled a lawsuit filed by the Federal Housing Finance Agency (FHFA), which had accused it of misrepresenting mortgage-backed securities (MBS). The bank shelled out about $885 million for the resolution.
The lawsuit settlement by UBS AG depicts its efforts at resolving litigations associated with risky dealings during the financial crisis. It also shows its attempts to reduce costs over the upcoming period. Further, the move is expected to provide relief to investors who were duped through such risky investments.
UBS AG currently carries a Zacks Rank #4 (Sell). Some better performing banks include Barclays PLC (BCS - Free Report) , The Bank of Nova Scotia (BNS - Free Report) and Mitsubishi UFJ Financial Group, Inc. (MTU - Free Report) , all of which carry a Zacks Rank #2 (Buy).