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UBS Shareholders Retain Right to Legal Action Against Board

Zacks Equity Research

Shareholders of UBS Group UBS has rebuked top management by not endorsing its prior year’s performance, on account of the $5 billion penalty that was imposed on the lender in February for helping French clients evade taxes.As an outcome, shareholders have retained the power to take legal action against management.

At the annual meeting held on Thursday, only 41.7% of investors voted to formally discharge the board and top executives from any legal liability on the tax case. Thus, it failed to reach the majority. It does not necessarily indicate any immediate consequences, but keeps the board exposed to any potential lawsuits from shareholders.

Chairman Axel Webersaid, “I interpret your decision that the uncertainty about the open French court case worries you and you want to keep all legal possibilities open. I can understand this.”

The other time when UBS shareholders had taken a similar step against management was during 2010, when they voted against performance in 2007 for incurring billions of losses related to subprime mortgages.

Last week, UBS reported first-quarter 2019 net profit of $1.1 billion, which was 27% below the prior-year quarter figure. Results were affected by disappointing performance in Global wealth management and Investment Bank units.

UBS is focused on its goal to strengthen core operations. Also, it undertakes cost cutting measures, which will aid bottom-line growth. However, the top line remains under pressure due to a persistent negative interest rate environment in the domestic economy. Also, constant legal hassles pose a headwind.

In six months’ time, UBS has gained 4.3% on the NYSE against 1% decline recorded by the industry.

The company currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks in the same space are The Bank of N.T. Butterfield & Son Limited NTB, ICICI Bank Limited IBN and Banco Latinoamericano de Comercio Exterior, S.A. BLX. All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Bank of N.T. Butterfield has been raised 7.4% for the current year in the past 30 days. The company’s share price has jumped 14.4% in the past three months.

ICICI Bank’s earnings estimates for 2019 have remained stable in the past 30 days. Its share price has risen 14% in the past three months.

Banco Latinoamericano’s shares have gained 12% in three months’ time. Its earnings estimates for 2019 have moved up 3.4% in the past 60 days.

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ICICI Bank Limited (IBN) : Free Stock Analysis Report
 
Banco Latinoamericano de Comercio Exterior, S.A. (BLX) : Free Stock Analysis Report
 
Bank of N.T. Butterfield & Son Limited (The) (NTB) : Free Stock Analysis Report
 
UBS Group AG (UBS) : Free Stock Analysis Report
 
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