Facebook loses friend after UBS profits halve

In a shocker of second quarter, Swiss banking giant UBS lost 349m Swiss francs on its investment in Facebook shares, more than halving its profits compared with the previous year.

by Michael Northcott
Last Updated: 19 Aug 2013

Facebook’s flotation has been a roller-coaster for almost everyone involved: first we had the $100bn valuation, then technical glitches on opening day which threw trading into disarray. At the end of it all we have a share price that plummeted to 39% below the initial sale price. Thanks to this debacle, UBS today reports Q2 profits of 425m Swiss francs, down from 1bn francs in the same period last year. Its loss on Facebook is equivalent to £227m. Something tells us UBS has hit the ‘unlike’ button.

The results look considerably worse when you isolate the investments division of the bank. That arm reported a loss for the quarter (although unspecified), having made 730m Swiss francs profit a year earlier. In a statement, UBS hit out at NASDAQ for its ‘gross mishandling of Facebook’s market debut’, and said that ‘due to multiple operational failures by NASDAQ, UBS’s pre-market orders were not confirmed for several hours after the stock had commenced trading.’ Sounds like a fair excuse, but as we remember it, everyone was concerned about whether the share price would hold up anyway. Perhaps UBS shouldn’t have invested so much? Just sayin’…

Anyway, the bank is not going to come up smiling any time soon: it said in a statement that earnings are likely to remain flat in the third quarter thanks to failure to resolve banking problems in Europe, and also that fact that Q3 is normally slower anyway. Add to that the burden of the new EU Basel III banking rules – which force banks to hold much larger amounts of capital than previously - and they’ve got rather a lot on their plate. We doubt CEO Sergio Ermotti will be tagged in any photos popping champagne corks this summer. 

Nevertheless, UBS did still make hundreds of millions in profit for the quarter. But it’s no doubt painful to lose so much cash, especially when Zuckerberg pocketed a nice chunk of the IPO capital himself and dashed off on an expensive honeymoon the day after. *Ermotti unfriends Zuckerberg*.

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