UBS to raise more capital and forecasts second quarter loss


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Swiss bank UBS has unveiled plans to raise 3.8 billion Swiss francs ((£2.1billion) in a share sale and forecast a second-quarter loss, sending its stock lower today.

The world's largest wealth manager and one of the hardest-hit major banks in the financial crisis, said it would to place 293.3 million new shares at 13 francs with a few big institutional investors.

A spokesman said simple market opportunity was behind its decision to seek the new capital now at a 6.9 percent discount to Thursday's close.

UBS stock, which fell 6 percent on Thursday to 13.97 francs, was down 0.7 percent to a nine-week low at 13.87 francs this morning. The European banking sector was up 1.2 per cent.

Kepler Capital Markets analyst Dirk Becker said the move 'closes the largest part of the 5 billion franc capital gap that we had identified for them.

UBS

UBS stock fell today after it announced a £2.1bn capital raising plan

'At the same time, UBS gave an update on its operating performance. We find it extremely disappointing that the bank suffered another loss, albeit apparently lower than the 2 billion franc loss for Q1,' he said.

UBS said it would likely post a second-quarter loss although its operating results, helped by improved investment banking conditions and lower losses and write-downs, should be better than the first quarter.

The bank said it has seen net outflows in its three wealth and asset management units so far this quarter.

A string of negative headlines about UBS in the past year has prompted big client withdrawals, particularly over a U.S. case seeking the names of 52,000 Americans suspected of using the bank to hide nearly $15billion in assets from the taxman.

The U.S. Justice Department denied earlier this week it was planning to drop the case and said it would file a brief seeking an enforcement of the summons on June 30 although it was still willing to consider a settlement.

UBS's woes prompted the Swiss government to inject 6 billion francs in October in exchange for mandatory convertible notes that could give it a 9.3 per cent stake in the bank.

In connection with the capital raising, the government said it had agreed not to sell any UBS shares resulting from any conversion of the MCN before Aug. 4 - when second-quarter results are due - without the consent of the bank.

The government has said it wants to sell its stake as soon as justifiable, but emphasised UBS had to be on solid ground first.

Swiss banking regulator FINMA and the Swiss National Bank have indicated they wanted UBS to strengthen its capital base before any government exit.

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