UBS expected to seek capital via writedowns

By Stuart Kelly  |   2008-7-4  |     NEWSPAPER EDITION

UBS AG may post US$6.9 billion of additional writedowns and seek to raise more capital, according to Citigroup Inc.

Yesterday's news came a day after Chairman Peter Kurer told a newspaper the largest Swiss bank would not need more funds.

The Zurich-based company, which wrote down US$38 billion over the past three quarters, still carried US$83 billion of "risk exposures that are likely to require further markdowns," London-based Citigroup analyst Jeremy Sigee said in a note obtained by Bloomberg News yesterday.

Sigee, who rates UBS "hold" with a "high risk" caveat, estimates the company may post a loss of 4.5 billion Swiss francs (US$4.4 billion), and announce writedowns of as much as 7 billion francs when it reports second-quarter earnings on August 12.

JPMorgan Chase & Co analysts on Wednesday said UBS may need to mark down its assets by a further 5.1 billion francs.

Sigee blamed a slump in financial markets for asset price declines, and said UBS may need to raise more capital, either from asset sales or from shareholders.

Kurer, in remarks published by Swiss newspaper Finanz & Wirtschaft, said the bank would not need more funds.

UBS shares fell 18 centimes, or 0.9 percent, to 20.44 francs by 11:11am in Swiss trading yesterday, bringing declines this year to 56 percent.

Banks and securities firms have turned to investors for US$322 billion to replenish reserves after US$403 billion of writedowns and credit losses tied to the collapse of the United States subprime mortgage market.

UBS trails only Citigroup in credit losses and capital raising after turning to investors for US$29.5 billion since the credit crisis began a year ago.

Strategic review

Speculation that financial firms would need more funds helped drive an index of European banking shares down 8.3 percent in the previous five days.

Kurer, who replaced Marcel Ospel as chairman in April, is leading a strategic review of all of the bank's businesses to make them better complement the wealth-management unit, which he has called the "core franchise."

The bank plans to provide results of the review at an extraordinary shareholders' meeting on October 2.

The meeting was called to elect four new board members, as Kurer seeks to increase the financial expertise on the board.

UBS is also facing a US probe into whether the Swiss bank helped affluent customers evade American taxes.