NEW YORK / ZURICH (Reuters) – UBS Group AG ( UBSG.S ), Switzerland's largest bank, faces another potentially costly legal battle that the US Department of Justice prepares civil charges for the sale of mortgage-backed securities in the run-up to the financial crisis in 2008.
PHOTO: The logo of the Swiss bank UBS is set in Zurich, Switzerland, October 25, 201
UBS said Wednesday that it is expected to be sued by the Ministry of Justice so early as Thursday. The bank said that the allegations were not supported by the facts or the law, and it would dispute all complaints strongly.
Analysts at Zuercher Kantonalbank said it was unclear how long US lawsuits might last and that it was difficult to estimate what size UBS could meet.
"Nevertheless, it is important for us to bring the matter to a quick conclusion so that clarity prevails," said a research note, and kept its "market weight" recommendation.
The analysts said they believed that more than half of the 1.2 billion Swiss francs ($ 1.20 billion) UBS has been allocated for legal dangers that are not core, were devoted to the US case.
UBS said Wednesday that it was expected that DOJ would apply for unspecified monetary penalties that came from mortgage loans dating back to 2006 and 2007.
UBS shares increased 1 percent in morning trading, in line with the European banking sector index. SX7P.
The potential US action is one of the last that deals with alleged breach of the sale and merger of mortgage loans that helped to cause the financial crisis.
Vontobel analysts said UBS's relatively modest role in the mortgage bond market was in stark contrast to competing banks that had already settled with US authorities.
DOJ has decidedly similar requirements with Citigroup Inc ( CN ), Deutsche Bank ( DBKGn.DE ), JPMorgan Chase & Co. ( JPM.N ) , Credit Suisse Group ( CSGN.S ), Morgan Stanley ( MS.N ), Goldman Sachs ( GS. N ), Bank of America Corp. BAC.N ) and Barclays Plc ( BARC.L ).
Barclays reached a $ 2 billion settlement in March, one of the lower payments from banks facing such claims. The British bank had resisted a punishment proposal proposed during settlement negotiations, something UBS has done.
HSBC Holdings Plc ( HSBA.L ) decided to pay $ 765 million in October to settle with the Justice Department for the sale of defective mortgages while the Royal Bank of Scotland Group Plc ( RBS .L ), a major player in the loan-linked market, reached a $ 4.9 billion agreement in May.
UBS raised $ 1.5 billion of US mortgage in a $ 5 billion market and lost more than $ 45 billion when the housing market collapsed, telling a person familiar with Reuters.
In a trial in France, which UBS has chosen not to settle, the bank is fighting money laundering and tax fraud over prosecutors that helped wealthy customers avoid tax in France. UBS refuses accusations.
If found guilty of money laundering, UBS could be fined up to 5 billion euros (5.71 billion dollars). It can also face injuries attributed to the French taxpayer for the missing income, while its executives risk imprisonment.
The French state has asked for 1.6 billion euros in damages, which UBS has called excessive.
During the French survey, UBS concluded a settlement offer of 1.1 billion euros made by the authorities, has legal sources said.
($ 1 = 1,0017 Swiss Francs)
($ 1 = 0.8750 euros)
Further reporting by Angelika Gruber in Zurich; Editing Jane Merriman