April 1, 2008
UBS Writes Down $19 Billion and Seeks New Capital
By REUTERS
Filed at 1:43 a.m. ET
ZURICH (Reuters) - UBS AG wrote down an additional $19 billion on assets on Tuesday, causing a net loss of 12 billion Swiss francs ($12.03 billion) in the first quarter, and said it would seek 15 billion francs in new capital through a rights issue of shares.
The moves, though expected, deal a new blow to the world's largest wealth manager and the European bank hardest hit so far by the credit crisis, still reeling under the weight of billions of dollars in bad investments.
The bank's chairman, Marcel Ospel, would not seek re-election, UBS said in a statement.
UBS said it would create a new division to deal with the ailing assets after its mortgage-related positions deteriorated further in the quarter, in a clear move to draw a line under the crisis which has shaken investor confidence in the Swiss bank.
While the group was able to reduce some of its exposure to ailing debt, other potential risks increased and its overall position in U.S. mortgages deteriorated further, UBS said.
The writedowns come at the upper end of expectations and on top of $18.4 billion in damage caused by the subprime crisis last year, which had already forced the bank to ask shareholder approval for 19 billion francs in capital-raising measures in February.
The creation of a so-called workout unit, sometimes called a "bad bank," would allow UBS to sequester the credit problems in a separate division, permitting management to focus on the group's profitable operations and investors to assign value to them.
The bank needs a sound capital base to underpin its wealth-management business for rich clients, who have less tolerance to losing money than institutional investors and are easily irked by negative headlines.
Analysts had expected the bank to write down an additional 10-20 billion francs in 2008.
(Reporting by Thomas Atkins)
“A nation can survive its fools, and even the ambitious. But it cannot survive treason from within. For the traitor appears not a traitor; he wears their face and their arguments, he appeals to the baseness that lies deep in the hearts of all men. He rots the soul of a nation, he works secretly and unknown in the night to undermine the pillars of the city, he infects the body politic so that it can no longer resist. A murderer is less to fear. The traitor is the plague.” Marcus Tullius Cicero