[ by Melanie Gretchen ]

UBS paid heavily for its legal matters, including its role in a global rate-manipulation scandal.  All told, the largest Swiss bank reported a quarterly loss equivalent to US$2 billion, compared to a quarterly profit of $355 million one year earlier.  The bank noted that its alleged involvement any rate manipulation was not the sole reason for its losses.  In a letter to shareholders, the following explanation was provided:

"The bank's performance reflects the effects of the challenging operating environment during the year, the costs involved in reshaping the business and the actions we took to address the challenges we faced.  While progress was made on many issues during 2012, many of the underlying challenges remain at the start of the new year." -- Chairman Axel Weber, CEO Sergio Ermotti.

So far, it looks like Mr. Ermotti is on the right track.  Since assuming leadership, his efforts to reduce costs have included the following:

• elimination of jobs;
• reduction of capital-intensive trading operations;  and,
• repairs to the bank's reputation, damaged by a series of scandals and related fines:  fines for helping American clients evade U.S. taxes;  $1.5bn in fines to settle cases involving the manipulation of Libor and other benchmark interest rates.

On the plus side of the ledger, UBS accomplished ... the following:  (i) $1.5 billion in net cost savings;  (ii) plans to increase its dividend payout for 2012 by 50%, to 16¢ a share;  (iii) a linkage of bonuses to the firm's performance;  and, (iv) a retraction of bankers' deferred compensation if the bank's capital ratio were to fall under a certain level.

For further details, go to [Dealbook, 2/5/13].