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UBS Shares Rise on News of FHFA Settlement

NEW YORK ( TheStreet) -- Shares of UBS (UBS - Get Report) rose more than 3% in pre-market trading after it pre-announced its second-quarter results and said it entered into an settlement with the Federal Housing Finance Agency(FHFA) over claims related to mortgage-backed securities sold between 2004 and 2007.

The FHFA, regulator of bailed-out mortgage giants Fannie Mae (FNMA) and Freddie Mac (FMCC), in 2011 sued 18 banks, including Bank of America (BAC - Get Report), Citigroup (C - Get Report) and UBS, in connection with mortgage-backed securities sold to the agencies during the height of the subprime mortgage boom.

The regulator claimed the banks misrepresented the underlying quality of the mortgages.

UBS did not disclose the size of the settlement. It did disclose that its second quarter results would include a pre-tax charge of CHF 700 million (approximately $750 million) in its non-core and legacy portfolio.

The bank said the settlement would "encompass pending RMBS-related litigation brought by the FHFA against UBS on behalf of Fannie Mae and Freddie Mac as well as certain unasserted claims," and would be covered by litigation reserves set aside by UBS in the second quarter of 2013 and in prior periods.

UBS is the latest bank to settle charges in connection with the lawsuit. In late May, Citigroup announced that it had entered into a settlement with FHFA over $3.5 billion worth of MBS for an undisclosed sum. Earlier in the year, GE (GE - Get Report) announced that it had settled the lawsuit, again keeping the terms of the agreement confidential.

The Swiss bank reported a second-quarter net profit CHF 690 million (approximately $738 million) and said that it had made progress towards capital goals, with its Basel III Tier I common ratio rose to 11.2%.

-- Written by Shanthi Bharatwaj New York.

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Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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