Time covers for UBS. The Swiss Bank continues to bear the costs of the crisis of the "sub-prime", which was hit hard its funding and investment bank. The establishment yesterday announced a plan for recapitalisation of 19.4 billion (EUR 11.7 billion) Swiss francs, and at the same time, additional impairments of its assets in the US $ 10 billion. The Bank has at the time warned that it would be "possible that UBS recorded a net loss accruing to the shareholders for the fiscal year 2007 all", which would be a first since the creation of UBS ten years ago. The title lost 3 in the morning to recover and advance more than 1.6 at the end.
The recapitalisation of the Bank, which involved fifteen days after the entry of an Abu Dhabi Fund with a capital of the Citi American for $ 7.5 billion, will be through the issuance of 13 billion francs in convertible securities. It will be underwritten by a sovereign wealth Fund of Singapore, the ICG, which invests 11 billion francs, and an investor "strategic anonymous in the Middle East", to the tune of 2 billion francs. As in the case of Citi, coupon bonds is high, since it reaches to 9. But, according to a broker, "the fact that the increase of capital is already below is rather a good sign of UBS's long-term health".
The level of risk reduction
Two investors could sit on the Board of Directors of the Bank. Singapore Fund will hold in 9 of UBS and the anonymous investor 1.5. "We made this significant in UBS Investment, because we have confidence in the ability of the Bank's long term growth, particularly in its wealth management activities", said the General Director of ICG, Tony Tan Keng Yam yesterday.
To strengthen the Bank's capital, the dividend in cash for the year 2007 should be replaced by a stock dividend, which will increase the own funds of 4.4 billion francs. Finally, a plan for the removal of 36.4 million shares has been cancelled. These securities will be sold on the market, which represents about 2 billion francs in additional own funds. At the end of the operation, the ratio of funds own "hard" of UBS will be greater than 12, compared to 10.6 end of September.
New announced impairment, they are essentially about a CDO and positions in the "super senior" debt, said the Bank. Last month, the Financial Director, Marco Suter, nevertheless warned analysts that UBS should not pass new write-downs in the fourth quarter. In October, the Bank announced 4.2 billion francs of impairment losses related to the crisis and a loss of 830 million francs in the third quarter. "UBS has been clever this time coupled with bad news with some good, said Dieter Winet, Manager at Swisscanto Asset Management, cited by Bloomberg." It is positive that the capital be placed in solid hands. This will restore confidence in the private banking and asset management, and generate new business.
Marcel Ospel, Chairman of UBS, has in any case considered necessary to reposition the Investment Bank, until here one of the most vulnerable in Europe to the credit crisis. "We will ensure in future that our investment bank activities develop by focusing on the needs of our business and institutional customers, and to maximize synergies with wealth and asset management", he said yesterday. What could go through transfers of assets and a reduction in the level of risk taken in the markets. "An investment bank may be lost and will necessarily be one day, felt Marcel Rohner, CEO of UBS, yesterday. But this should never take the entire group into the red. Wealth management clients do not like uncertainty.