Hard to imagine this coming at a worse time…
UBS shares are diving after the bank unexpectedly has announced that a rogue trader has cost it $2 billion.
The stock has fallen at one point by nearly 10%.
The bank put out this super-short statement:
UBS has discovered a loss due to unauthorised trading by a trader in its Investment Bank. The matter is still being investigated, but UBS’s current estimate of the loss on the trades is in the range of USD 2 billion. It is possible that this could lead UBS to report a loss for the third quarter of 2011. No client positions were affected.
$2 billion pares in comparison to Kerveil at SocGen (over $5 billion, at a smaller bank), but it’s not nothing, and the backstory is sure to be interesting as always.
No trader has been identified, and of course there will be questions about the difference between a “rogue” trade and a trade that has simply gone bad. The area tends to be pretty grey.
UPDATE: Something weird, apparently UBS doesn’t know who the trader is yet. How can that be?
An internal UBS memo shows that that the rogue trading incident was uncovered only in the last 24 hours (via @jilltreanor)
UPDATE 3: Via FTAlphaville, here’s the internal memo:
We regret to inform you that yesterday we uncovered a case of unauthorised trading by a trader in the Investment Bank. We have reported it to the markets in line with regulatory disclosure obligations. The matter is still being investigated, but we currently estimate the loss on the trades to be around 2 billion US dollars. It is possible that this could lead UBS to report a loss for the third quarter of 2011. No client positions were affected.
We understand that you have already had to contend with unfavorable, volatile markets for some time now. While the news is distressing, it will not change the fundamental strength of our firm.
We urge you to stay focused on your clients, who are counting on you to guide them through these uncertain times.
We want to reassure you that we, together with the rest of the management, are working closely with the Investment Bank’s management and risk and controlling to get to the bottom of the matter as quickly as possible, and will spare no effort to establish exactly what has happened. We will keep you updated on the progress of our investigation.
Update 4: The UBS trader has been identified as Kweku Adoboli.
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