UBS AG, Europe's largest bank by assets, said it will write down US subprime investments by US$10 billion and raise 13 billion francs (US$11.5 billion) by selling stakes to investors in Singapore and the Middle East.
UBS expects a loss in the fourth quarter and possibly for this year, the Zurich-based company said in an e-mailed statement yesterday. Government of Singapore Investment Corporation Pte will invest 11 billion francs through the purchase of mandatory convertible bonds, while an unidentified Middle Eastern investor will invest 2 billion francs, UBS said.
Securities firms and banks had announced about US$66 billion in losses and markdowns linked to the collapse of the US subprime mortgage market this year. UBS reported its first loss in almost five years in the third quarter after the subprime contagion led to about US$4.66 billion in markdowns on fixed-income securities and leveraged loans.
"The industry has been moving to more aggressive markdown rates" on subprime-related assets, Kinner Lakhani, a London-based analyst at ABN Amro Holding NV with a "hold" rating on UBS shares, said before yesterday's release. UBS' previous writedowns had been "well below industry benchmarks."
UBS follows Citigroup Inc, the largest US bank, in taking on strategic investors to bolster capital. The New York-based bank announced last month a US$7.5 billion cash infusion from Abu Dhabi to replenish capital after record mortgage losses wiped out almost half its market value.
UBS shares have fallen 21 percent over the past 12 months, erasing more than 25 billion francs of the bank's market value. The 63-member Bloomberg Europe Banks and Financial Services Index fell 11 percent over the same period.
UBS also plans to sell 36.4 million treasury shares that it previously intended to cancel, raising about 2 billion francs, and proposed replacing this year's cash dividend with stock, boosting capital by 4.4 billion francs.
The bond sale and dividend replacement will have to be approved by an extraordinary shareholders meeting in mid-February, the bank said.
The bank's losses already cost the jobs of chief executive officer Peter Wuffli, his finance chief Clive Standish, investment-banking head Huw Jenkins and 1,500 people at the securities unit. Mounting writedowns also increase the pressure on chairman Marcel Ospel, newspapers including Sonntag have reported.
Marcel Rohner, who was named CEO in July, CFO Marco Suter and chief risk officer Joseph Scoby are scheduled to give analysts and investors a business update in London tomorrow.
"In the last several quarters, continued speculation about the ultimate value of our subprime holdings -- which remains unknowable -- has been distracting," Rohner said in the statement. "These writedowns will create maximum clarity on this issue and will have the effect of substantially eliminating speculation."
The bank was expected to write down about 2.6 billion francs in the fourth quarter, according to the average estimate of five analysts who published forecasts over the past month.
"Equity markets would like the full clean up," Kian Abouhossein, a London-based analyst at JPMorgan Chase & Co. with an "overweight" rating on UBS, said before yesterday's announcement.
UBS said on Oct. 30 that it had US$16.8 billion invested directly in residential mortgage-backed securities at the end of the quarter.
It also had US$1.8 billion of collateralized debt obligations, bonds created by repackaging other debt securities, as well as US$20.2 billion of so-called super senior securities, or AAA-rated structured debt that gets paid back ahead of other similarly rated bonds in case of a default.
MORE VISITORS: The Tourism Administration said that it is seeing positive prospects in its efforts to expand the tourism market in North America and Europe Taiwan has been ranked as the cheapest place in the world to travel to this year, based on a list recommended by NerdWallet. The San Francisco-based personal finance company said that Taiwan topped the list of 16 nations it chose for budget travelers because US tourists do not need visas and travelers can easily have a good meal for less than US$10. A bus ride in Taipei costs just under US$0.50, while subway rides start at US$0.60, the firm said, adding that public transportation in Taiwan is easy to navigate. The firm also called Taiwan a “food lover’s paradise,” citing inexpensive breakfast stalls
TRADE: A mandatory declaration of origin for manufactured goods bound for the US is to take effect on May 7 to block China from exploiting Taiwan’s trade channels All products manufactured in Taiwan and exported to the US must include a signed declaration of origin starting on May 7, the Bureau of Foreign Trade announced yesterday. US President Donald Trump on April 2 imposed a 32 percent tariff on imports from Taiwan, but one week later announced a 90-day pause on its implementation. However, a universal 10 percent tariff was immediately applied to most imports from around the world. On April 12, the Trump administration further exempted computers, smartphones and semiconductors from the new tariffs. In response, President William Lai’s (賴清德) administration has introduced a series of countermeasures to support affected
CROSS-STRAIT: The vast majority of Taiwanese support maintaining the ‘status quo,’ while concern is rising about Beijing’s influence operations More than eight out of 10 Taiwanese reject Beijing’s “one country, two systems” framework for cross-strait relations, according to a survey released by the Mainland Affairs Council (MAC) on Thursday. The MAC’s latest quarterly survey found that 84.4 percent of respondents opposed Beijing’s “one country, two systems” formula for handling cross-strait relations — a figure consistent with past polling. Over the past three years, opposition to the framework has remained high, ranging from a low of 83.6 percent in April 2023 to a peak of 89.6 percent in April last year. In the most recent poll, 82.5 percent also rejected China’s
PLUGGING HOLES: The amendments would bring the legislation in line with systems found in other countries such as Japan and the US, Legislator Chen Kuan-ting said Democratic Progressive Party (DPP) Legislator Chen Kuan-ting (陳冠廷) has proposed amending national security legislation amid a spate of espionage cases. Potential gaps in security vetting procedures for personnel with access to sensitive information prompted him to propose the amendments, which would introduce changes to Article 14 of the Classified National Security Information Protection Act (國家機密保護法), Chen said yesterday. The proposal, which aims to enhance interagency vetting procedures and reduce the risk of classified information leaks, would establish a comprehensive security clearance system in Taiwan, he said. The amendment would require character and loyalty checks for civil servants and intelligence personnel prior to
RSS