Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

UBS Is Fined $4.2B in French Tax-Evasion Case

wsj.com

Post reply on HN
Print view View original

51–60 of 73 posts

Re: UBS Is Fined $4.2B in French Tax-Evasion Case

#51

Post by calpaterson »

repsilat wrote: post #19
mikeyouse wrote: post #5

Earlier quoted context omitted.

This isn't quite right -- The 4% loss could just represent the delta between what was already priced in and the actual loss. This case has been a long time coming so the expectation of the penalty should have been priced in long ago. Secondly, and it depends on the jurisdiction, but penalties and fees associated with wrongdoing generally aren't tax deductible. The US clarified this during the TCJA but most countries…

There's also that weirdness of financial companies having price-to-book less than one... (For UBS it's around 0.9. Don't ask me how it makes sense.)

Presumably that is down to straightforward doubt as to the value of UBS's book. It is not uncommon for unpopular companies that are holding a lot of their balance sheet at "market value" (as banks do) to trade at discounts to their stated book. Take a look at LSE:LAND, a "£10bn" REIT trading at a £6bn market cap.

Re: UBS Is Fined $4.2B in French Tax-Evasion Case

#52

Post by mruts »

repsilat wrote: post #19
mikeyouse wrote: post #5

Earlier quoted context omitted.

This isn't quite right -- The 4% loss could just represent the delta between what was already priced in and the actual loss. This case has been a long time coming so the expectation of the penalty should have been priced in long ago. Secondly, and it depends on the jurisdiction, but penalties and fees associated with wrongdoing generally aren't tax deductible. The US clarified this during the TCJA but most countries…

There's also that weirdness of financial companies having price-to-book less than one... (For UBS it's around 0.9. Don't ask me how it makes sense.)

Well, just as this case demonstrates, certain companies have exposure to other things (like paying a gargantuan fine) that would make their shareholder equity trade at a discount.

Re: UBS Is Fined $4.2B in French Tax-Evasion Case

#53

Post by mruts »

brianpgordon wrote: post #16
smallgovt wrote: post #4

Earlier quoted context omitted.

UBS's market cap is $46B. After this was announced, their stock fell 4%. This drop, if permanent, would equate to a loss of ~$1.84B in market cap. There are many factors that could be influencing price, but if we attribute this 4% delta entirely to the announcement, the market is guessing the actual penalty will amount to $1.84B. This could be bc the market thinks UBS can appeal with a 50% success rate, or can negoti…

It seems like your back-of-the-envelope estimate is assuming that the market values UBS at exactly its assets minus its liabilities. This disregards goodwill, which (someone correct me if I'm wrong) includes expectations of future earnings. That number wouldn't even be affected in a straightforward way since banks, especially European banks, tend to be levered quite a bit in order to survive on interest income.

Goodwill is often counted as an asset (or a liability if they don’t want to pay taxes) on the company’s book. I’m not sure if UBS included it on theirs, though

Re: UBS Is Fined $4.2B in French Tax-Evasion Case

#54

Post by robocat »

repsilat wrote: post #18
AtHeartEngineer wrote: post #8

Earlier quoted context omitted.

It was 4.2 billion not million, it probably should have been more, but that's definitely not a slap on the wrist.

Right. For context, that's around 9% if their $48 billion market cap. Much worse than sending any one person to jail. Also: in the US, I've heard the "value of saving a life" for some decision calculations to be assumed at ten million dollars. That's $200k per year for 50 years. (In New Zealand, from talking to some civil engineers, it is a lot lower.) At the American price, the fine is worth 420 human lives.

One NZ price that is just in the news is 4.7MM NZD.

https://i.stuff.co.nz/national/politics/110753822/is-a-life-...

Re: UBS Is Fined $4.2B in French Tax-Evasion Case

#55

Post by cm2187 »

repsilat wrote: post #19
mikeyouse wrote: post #5

Earlier quoted context omitted.

This isn't quite right -- The 4% loss could just represent the delta between what was already priced in and the actual loss. This case has been a long time coming so the expectation of the penalty should have been priced in long ago. Secondly, and it depends on the jurisdiction, but penalties and fees associated with wrongdoing generally aren't tax deductible. The US clarified this during the TCJA but most countries…

There's also that weirdness of financial companies having price-to-book less than one... (For UBS it's around 0.9. Don't ask me how it makes sense.)

There may be good reasons for that.

First, there are two ways to value companies, depending on what kind of companies they are. The two extremes are on one side a consulting firm, where the value is worth only the present value of the future fees to be earned by the consultants. But the company itself has no asset, very little debt, and its balance sheet is pretty much irrelevant to its valuation. The other extreme is an investment fund, where the company is worth exactly the current market value of its assets, it has no other future revenues other than the expected incomes from these assets.

A bank is somewhere in the middle. It is kind of an investment fund in the sense that all its assets are financial assets that can be sold pretty much at their book value (unlike a factory where the book value may mean very little in term of how much the asset is really worth). But the book value may differ from the fair market value (that's often the case if there are bad loans). But part of the value will also be generated from profits that are unrelated to these assets: fees on payment processing, advisory fees, trading income, etc. So part of the value is also a PV of future revenues.

And these future revenues may be negative. If you look at the past 10 years, banks have experienced huge revenue volatility. From trading losses, fraud (Kerviel style), fines (like UBS here), bad loans (RBS and HBOS style), etc.

And then you can have all sort of weird technicalities. Like the book value may be increased for gains on own credit (if the company fair values part of its liabilities). That's a paper gain that the market is unlikely to give any credit for.

Re: UBS Is Fined $4.2B in French Tax-Evasion Case

#56

Post by kentosi »

arama471 wrote: post #3

Does anyone know what the likelyhood of the 4.2B being paid out is? I imagine that UBS will go through all possible appeals processes. Also if the article is right in that this was affected by the protests, then that is a big win for protesting.

I want to be hopeful of this, but according to the article: "In the U.S., UBS is contesting charges from ... the financial crisis more than a decade ago."

That was 10 years ago, and and it's still being argued in court. I can very well see this being another delayed settlement that will drag on for another decade or more.

Re: UBS Is Fined $4.2B in French Tax-Evasion Case

#57

Post by HenryBemis »

kakwa_ wrote: post #40
misiti3780 wrote: post #6

Another slap on the wrist. No one goes to jail because of Deferred Prosecution Agreements HSBC got fined about half that when they caught laundering money for the Mexican cartels a few years back. True story: HSBC had to design special teller windows because the standard ones were too small to fit the sacks of money that were being brought in and laundered. If you want to know why these guys don't go to jail, pull up…

The French hierarchy of UBS got some prison time, but it's 6 to 18 suspended prison sentences, so no real jail time. They were also fined 50000 to 300000 euros personally (they have to pay as private citizens, it's not part of the 3.7B euros fined to UBS). Not completely full, but also not completely empty.

50k and 300k are peanuts to these people, who have been pocketing millions each year in salaries and bonuses.

Jail time would be the only real punishment. They take very calculated and rewarding risks. If they don't get caught they walk away with many millions. If they get caught they walk away with many millions minus a few k.

Technically this is a "sure bet".

Re: UBS Is Fined $4.2B in French Tax-Evasion Case

#58

Post by HenryBemis »

thefounder wrote: post #35
missedthecue wrote: post #9

Earlier quoted context omitted.

HSBC allegedly laundered (not revenue, not profit, they laundered ) $880 million. They were fined $1.9 billion. Not "fined about half"

They were caught with $880 millions. That doesn't mean they laundered only that.

People and 'the News' most times don't read the details, which is logical since we never get the full reports on our hands. The scope of the audit/examination should document the limitations/boundaries of the examination. E.g. X, Y, and Z, countries, A, B, and C subsidiaries, for the period of dd/mm/yyyy to dd/mm/yyyy. And which transactions where checked? All deposits? From all business lines? E.g. bank deposits OR their investment brokers?

There are many ways to get money in a large Banking group like UBS, HSBC, and others. They have become Lernaea Hydras and for a good reason.

Re: UBS Is Fined $4.2B in French Tax-Evasion Case

#59

Post by misiti3780 »

missedthecue wrote: post #9
misiti3780 wrote: post #6

Another slap on the wrist. No one goes to jail because of Deferred Prosecution Agreements HSBC got fined about half that when they caught laundering money for the Mexican cartels a few years back. True story: HSBC had to design special teller windows because the standard ones were too small to fit the sacks of money that were being brought in and laundered. If you want to know why these guys don't go to jail, pull up…

HSBC allegedly laundered (not revenue, not profit, they laundered ) $880 million. They were fined $1.9 billion. Not "fined about half"

i meant roughly half of the 4.2

Re: UBS Is Fined $4.2B in French Tax-Evasion Case

#60

Post by misiti3780 »

tc313 wrote: post #10
missedthecue wrote: post #9

Earlier quoted context omitted.

HSBC allegedly laundered (not revenue, not profit, they laundered ) $880 million. They were fined $1.9 billion. Not "fined about half"

I think he meant half of $4.2 billion.

indeed i did thanks
Post reply on HN