UBS said it settled a Federal Housing Finance Agency lawsuit over soured mortgage investments, taking an SFR 865 million (€700m) charge against second-quarter earnings for litigation, impairments and other provisions.

The Swiss bank, which reports the full quarter on July 30, said its net profit was SFR 690m, from SFR 425m a year ago. It did not disclose the specific charge to settle the mortgage probe.

Analyst consensus for the quarter’s net profit is SFR 558m, according to Thomson Reuters data. The shares rose 2.7 per cent in pre-market indications. UBS said net new money was SFR 10.1 billion for the quarter at its flagship private banking arm and SFR 2.7bn in its US-based brokerage, but that its asset management arm suffered SFR 2bn in outflows.

The result shows that UBS’s private bank, which attracted the most customer money in six years last quarter, continues to thrive. The unit is the centrepiece of UBS’s strategy following exits from large parts of the fixed income business – including cutting 10,000 jobs across the bank.

UBS, the largest private bank in the world, is seeking to reinvent itself following a series of scandals, including a $1.5bn penalty for manipulating Libor and other benchmark interest rates.

The US settlement comes shortly after UBS and 13 other banks sued by the FHFA – which regulates Fannie Mae and Freddie Mac after the two mortgage finance companies were placed into federal conservatorship at the height of the 2008 financial crisis – lost a bid to have a US appeals court intervene in their cases based on what they called a judge’s “gravely prejudicial” rulings.