Offshore US banking exit seen minor hit for UBS

By Sam Cage

ZURICH (Reuters) - Quitting U.S. offshore private banking should not have a major impact on UBS AG (UBSN.VX: Quote, Profile, Research), though the Swiss bank may still have to pay a hefty fine due to an investigation of tax fraud, analysts said on Friday.

In a dramatic hearing on Capitol Hill before a Senate subcommittee on Thursday, a senior UBS executive apologized and said the bank would cease offering cross-border private banking through its unregulated units to U.S.-domiciled customers.

"U.S. offshore private business was not a big business for UBS," said Helvea analyst Peter Thorne, who estimated it represented about 40 billion Swiss francs ($39.22 billion) of assets under management, compared to 1 trillion francs at UBS's wealth management business.

"We expect a large fine for UBS as a result of the investigation on tax fraud, maybe 500 million Swiss francs ($490.2 million)," Thorne said.

"Of course, UBS does have a large U.S. onshore presence with the former Paine Webber brokerage business that it now calls Wealth Management USA and it will presumably try and transfer as many of its clients to that business as it can," he said.

UBS shares rose 6.2 percent to 21.68 Swiss francs by 1126 GMT on Friday, mainly due to forecast-beating results from U.S. bank Citigroup (C.N: Quote, Profile, Research), but also on relief the U.S. hearings may have a less significant impact than previously expected.

"The bank will no longer provide offshore banking services to U.S. residents and will most likely only face a fine. A few weeks ago, there had been concern that its banking licence in the U.S. could be jeopardized," analysts at Swiss bank Vontobel said in a note.

(Editing by Sue Thomas)