UBS reveals another 19-billion-dollar subprime drama
01/04/2008 08h03

ZURICH (AFP) - Swiss banking giant UBS revealed a second round of massive subprime-related writedowns on Tuesday of about 19 billion dollars, the biggest hit in the mortgage crisis so far worldwide.

The new blow is on top of 18.4 billion dollars (11.7 billion euros) the bank wrote down in 2007, and will plunge Switzerland's biggest bank into a net loss of 12 billion Swiss francs (7.6 billion euros) for the first quarter this year.

The bank also said it wanted to raise 15 billion Swiss francs of new capital, and said it was changing its chairman.

The last writedowns for 2007 forced the bank into a controversial rescue recapitalisation by the Singapore sovereign wealth fund and by an unnamed investor in the Middle East.

UBS plunged to its first-ever full-year net loss of 4.4 billion Swiss francs in 2007.

It said in a statement on Tuesday that its chairman Marcel Ospel will not stand for a re-election this year, and would be replaced by Peter Kurer, who has been on the group's executive board since 2002.

To shore up its shareholders' equity again, the bank proposed an ordinary capital increase through a rights issue to raise about 15 billion Swiss francs in fresh capital.

In addition, it formed a new unit to hold currently illiquid US real estate assets.

"We believe this capital increase and the creation of a vehicle to separate problem assets from the remainder of our businesses will allow us to return to sustainable value creation over time," said Marcel Rohner, the bank's chief executive officer in a statement.

Ospel said: "My willingness to stand for re-election for a further one-year term was based on my desire to lead UBS out of its current difficult situation.

"We have worked very hard and have been able to address the firm's most pressing problems, thereby laying the foundation for the long-term success of the bank."

He added that he had "always stated that I ultimately take responsibility for the bank's situation, and that he believed that he had "made all necessary contributions".

UBS' share price has plummeted in recent months after the bank reported losses of 18 billion dollars in 2007 in the US subprime crisis.

Although the bank's subprime investments have attracted most attention, and criticism from aggrieved shareholders, the focus has shifted to so-called auction-rate securities.

Auction-rate securities are long-term bonds that could be sold at auctions every few weeks.

Original article: AFP
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