crisis, UBS has disclosed a shock $10 billion in additional
write-downs and secured an emergency capital injection from the
Singapore government and an unidentified Middle East
investor.
UBS plans to raise CHF13 billion ($11.5 billion) from selling bonds
convertible into shares. The Government of Singapore Investment
Corporation, which oversees the Asian state’s foreign reserves,
will invest CFH11 billion in the Swiss bank for a 9 percent stake.
The Middle East investor, variously reported to be from Saudi
Arabia or Oman, will put in CHF2 billion.
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In a boost for UBS, the bank disclosed an accelerated flow of new
money from its private clients despite the subprime crisis. UBS saw
net new money inflows into its Global Wealth Management and
Business Banking of around CHF30 billion in October and November.
This represented a more rapid growth rate than the third quarter,
it said.
Dieter Winet, a fund manager at Swisscanto Asset Management, said:
“This will help restore trust in private banking and asset
management and help UBS write new business.”
UBS chairman Marcel Ospel stressed that, in seeking a major
infusion, the bank was keen to ensure that its private banking
business remained secure. “Our losses in the US mortgage securities
market are substantial, but could have been absorbed by our
earnings and capital base. Nevertheless, it is important to always
maintain a notably strong capital position to support the continued
growth of our wealth management business, which is the largest
generator of value to UBS shareholders,” he said.
“In future, we will make certain that our investment banking
operations grow by concentrating on serving the needs of
institutional and corporate clients, and on maximising synergies
with wealth and asset management.”
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By GlobalDataHowever, the scale of UBS’s problems may lead to new calls for a
break-up of its current structure, centred on a universal approach.
A fresh discussion questioning UBS’s strategy and arguing for a
separate stock market listing of its wealth management arm will
most certainly arise, said Alois Pirker, analyst with independent
research company Aite. The new round of write-downs makes clear
“that proprietary trading isn’t the game for wealth managers. While
it results in a nice amount of extra income during good times, a
crisis like this more than counters any gains,” he said.
Announcing the capital infusion, UBS issued an earnings warning and
cancelled plans for a cash dividend. It scrapped a forecast for a
fourth-quarter profit and signalled that it may post a full-year
loss.
UBS has never posted a loss, mainly due to the strength of its
wealth management operations, which in 2006 accounted for more than
40 percent of its profits. Its losses have already cost the jobs of
CEO Peter Wuffli, his finance officer Clive Standish and investment
banking head Huw Jenkins. Ospel told a conference call that there
is “no pressure internally” for him to resign.
The $10 billion charge is one of the largest write-downs by any
global bank since the subprime crisis erupted.
