Big loss forces Ospel off UBS throne

UBS AG, battered by the biggest writedowns from the collapse of the US subprime mortgage market, reported a 12 billion-franc ($11.9 billion) first-quarter loss and said Chairman Marcel Ospel will step down.

The bank will seek 15 billion francs in a rights offer to replenish capital, on top of 13 billion francs already raised from investors in Singapore and the Middle East. UBS will write down $19 billion on debt securities, bringing the total to almost $38 billion since the third quarter of 2007. Zurich-based UBS also said it will cut jobs at the investment bank.

Ospel who helped form the world's largest money manager a decade ago, will be replaced by general counsel Peter Kurer.

UBS rose as much as 10 percent in Swiss trading on optimism the country's biggest bank will recover from its subprime losses.

UBS rose 2.02 francs to 30.88 francs by 1:08 pm in Zurich. The stock has fallen 41 percent this year, cutting the bank's market value to 64 billion francs and making UBS the second-worst performer on the 60-member Bloomberg Europe Banks and Financial Services Index.

The first-quarter writedown is greater than the $11 billion estimated by analysts at Merrill Lynch & Co and Oppenheimer & Co. Rising US mortgage defaults have caused about $230 billion in credit losses and writedowns at financial companies worldwide.

Standard & Poor's cut UBS' long-term counterparty credit rating by one level to AA- and said it may lower the rating further after the "risk management lapses, earnings volatility, and need for new capital".

The bank's Tier 1 capital ratio, a key measure of solvency, will rise to about 10.7 percent after the rights offer, UBS said. Without the capital increase, the ratio would have fallen to about 7 percent, the bank said.

UBS, with about 2.3 trillion francs in private-banking assets, said clients in Switzerland withdrew funds in the first quarter. The Swiss redemptions were offset elsewhere and net investments were "slightly positive", Chief Executive Officer Marcel Rohner said.

Losses already cost the jobs of former CEO Peter Wuffli, finance chief Clive Standish and investment banking head Huw Jenkins. Ospel, who was supposed to stand for re-election at the shareholders meeting on April 23 for a shortened, one-year term, helped arrange the previous capital increase.

"I ultimately take responsibility for the bank's situation," Ospel said in a statement. "With the measures that we have already taken, the proposals we are submitting to the annual general meeting and the processes we have put in place to deal with lessons learned, I believe that I have made all necessary contributions."

Agencies

(China Daily 04/02/2008 page17)