ZURICH , Dec 10, 2007 (AFP) – Swiss bank UBS turned on Monday to
state investment fund for nearly 10 billion dollars in new capital to fill a
huge hole caused by losses in the US mortgage crisis.
UBS, a leading name in both Swiss and international banking, also warned it
risked posting a net loss for the full year 2007 as a result.
"UBS has revised the assumptions and inputs used to value US subprime
mortgage related positions. This will result in further writedowns of around
10 billion dollars," the bank said in a statement.
The bank also said it expected to post a loss in the fourth quarter, and
"it is now possible that UBS will record a net loss attributable to
shareholders for the full year 2007."
UBS also said that a strategic investor in the Middle East , which it did
not identify, is injecting an additional two billion francs into the bank.
The Government of Singapore Investment Corporation (GIC) said it would
inject 11 billion Swiss francs (6.6 billion euros, 9.74 billion US dollars)
GIC’s deputy chairman and executive director, , told a
news conference that the fund’s total shareholding could amount to 9.0 percent
depending on the conversion price.
"Nine percent is a large stake. I think we would be the single largest
shareholder in UBS," Tan said.
UBS chairman Marcel Ospel revealed in a statement: "Our losses in the US
mortgage securities market are substantial."
The latest writedowns come after the bank reported its first quarterly loss
for five years in October owing to exposure to the crisis-hit US mortgage
Ospel welcomed the deal, and said he did not rule out the new
investors taking seats on UBS’s board.
The identity of the second, Middle Eastern investor has not been disclosed.
The UBS chairman told a conference call that "the writedown should lead to
more clarity and end all market speculation."
Analysts said that by announcing such a big writedown, UBS was hoping to
preclude any further bad news arising from the subprime crisis.
Cazenove Equities said that the writedown was "aimed at removing the issue
from the agenda once and for all".
meanwhile noted that UBS has "now moved from being the least
conservative in its write-downs to being the most conservative".
"In our view this doesn’t completely remove the debate on further
write-downs, but it establishes UBS as the most conservatively marked," it
said in a note to clients.
UBS shares staged a recovery in midday trade, as traders hoped this latest
writedown would be an end to the matter.
At 12.44 pm (1144 GMT), UBS shares were up 1.55 Swiss francs or 2.7 percent
at 58.75 Swiss francs, after opening down 3.2 percent.
GIC was established in 1981 to manage ‘s foreign reserves and now
manages "well above" 100 billion US dollars, making it one of the world’s
largest fund management companies, its website says.
Sovereign wealth funds such as ‘s GIC are becoming major
international finanical and corporate investors, prompting calls for greater
transparency in their actions.
"Some SWFs are becoming large players in financial markets and their
importance is set to go on increasing rapidly," the Organisation for Economic
Cooperation and Development said last week.
The OECD said the many SWFs are viewed as "opaque and secretive … [and]
at odds with standards applied in global financial markets," and it called for
codes of conduct such as those employed by ‘s state investment fund.
GIC’s managing director Ng Kok Song said the fund’s investment
was not aimed at securing total control of UBS.
"We’ve got no desire to control the business of the bank," but will seek to
create maximum value for all shareholders, he said. ‘s