EU Fines UBS, Nomura, UniCredit Over Illicit Bond Trading


The EU’s antitrust office has fined UBS Group (UBS), Nomura Holdings (NMR), and UniCredit for participating in a European Government Bonds (EGB) trading cartel. Some seven investment banks took part in the illicit bond trading, but not all were fined for various reasons. 

Collectively, the fine to the banks totaled EUR 371 million. UBS bore the heaviest burden, receiving a fine of EUR 172.4 million. The burden would have been greater had the regulator not reduced the possible fine by 45% because the bank cooperated with the investigation. (See UBS stock analysis on TipRanks)

Nomura was fined EUR 129.6 million, and UniCredit took a EUR 69.4 million hit. The regulator did not fine Bank of America (BAC), NatWest (NWG), Natixis, and WestLB despite finding they too participated in the anticompetitive bond trading behavior. NatWest escaped the fine because it reported the cartel to the regulator. 

“It is unacceptable, that in the middle of the financial crisis, when many financial institutions had to be rescued by public funding these investment banks colluded in this market at the expense of EU Member States,” said the EU’s antitrust division head, Margrethe Vestager.

The EGB is a type of bond issued in euro by the central governments of EU member states. The bond trades that put the banks in trouble occurred between 2007 and 2011, during the global financial crisis. The regulator said the banks’ conduct affected the entire European economic area. 

Deutsche Bank analyst Benjamin Goy upgraded UBS stock to a Buy from Hold rating and assigned it a price target of $18.96, which points to 20.35% upside potential.  

“Strong capital generation allows for significant capital return, potentially bolt-on M&A, and could absorb potential litigation risks if needed,” noted Goy. 

Consensus among analysts on Wall Street is a Moderate Buy based on 7 Buy, 4 Hold, and 1 Sell ratings. The average analyst price target of $18.59 implies 18.03% upside potential to the current price.

UBS scores a 9 out of 10 on TipRanks’ Smart Score rating system, implying that the stock is likely to outperform market expectations.

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