Switzerland’s currency war is troubling the country’s biggest bank.
UBS said Tuesday the rising currency could hurt future earnings after reporting a small rise in fourth-quarter profit. UBS shares dropped 5% in Zurich.
Net profit for the period rose to 963 million Swiss francs ($1.04 billion), up from 917 million Swiss francs a year earlier.
The shock rise in the value of the Swiss franc this year — especially against the U.S. dollar and the euro — along with negative interest rates in the eurozone and Switzerland would put pressure on profitability, the bank said.
Switzerland surprised markets last month by moving to allow its currency to trade freely against the euro.
The Swiss National Bank removed a cap of 1.2 Swiss francs to the euro, introduced during the eurozone crisis in 2011 when a flood of cash sought refuge in the traditional safe haven.
The value of the franc jumped nearly 25% to trade at parity to the euro, creating financial stress for many businesses and individuals.
UBS also confirmed it is being investigated by U.S. regulators over possible tax breaches, as global interest in the financial affairs of wealthy clients — particularly in Switzerland — continues to climb.
The bank said it is cooperating with the probe by the U.S. Securities and Exchange Commission and the U.S. Attorney’s Office for the Eastern District of New York over potential sales of “bearer bonds” and other unregistered securities.
It’s not the first time the firm has been in hot water with American regulators.
Six years ago UBS paid $780 million in fines and restitution after admitting it helped U.S. taxpayers hide money from the IRS.
More recently, the bank was stung with a $1.5 billion fine for its role in manipulating global benchmark interest rates.
Other banks are also facing scrutiny over tax. Documents published Monday showed how HSBC used its private bank in Switzerland to shield accounts worth more than $100 billion.
