Mumbai: UBS AG, Europe''''s largest bank by assets, will write down $10 billion in US subprime loans and raise $11.5 billion (13 billion francs) by selling stakes to investors in Singapore and the Middle East.

Government of Singapore Investment Corporation Pte. will invest 11 billion francs through the purchase of mandatory convertible bonds, while a Middle East investor – reported to be the Oman government – will invest 2 billion francs, UBS said.

Announcing the fresh write-down, equivalent to its entire net profit for 2006, UBS said it expects a loss in the fourth quarter as well. UBS said it had also "revised the assumptions and inputs used to value US sub-prime mortgage related positions".

In October, UBS said it had $16.8 billion invested directly in residential mortgage-backed securities at the end of the quarter. It also had $1.8 billion of collateralised debt obligations, bonds created by repackaging other debt securities, as well as $20.2 billion
of AAA-rated structured debt that gets paid back ahead of other similarly rated bonds in case of a default.

Global banks have so far reported losses in excess of $65 billion as a result of exposure to investment products linked to US sub-prime mortgages.

Major losers include: UBS ($13.5 billion), Citigroup ($11 billion), Merrill Lynch ($8 billion), Morgan Stanley ($3.7 billion), HSBC ($3.4 billion), Bear Stearns ($3.2 billion), Deutsche Bank ($3.2 billion), Bank of America ($3 billion), Barclays ($2.6 billion), Royal Bank of Scotland ($2.6 billion), BNP Paribas ($2.1 billion), Freddie Mac ($2 billion), Credit Suisse ($1 billion), Wachovia ($1.1 billion) and IKB ($1 billion).

The Organisation for Economic Cooperation and Development (OECD) expects subprime losses will reach $300 billion.

A report by the Bank for International Settlements (BIS) has found that the credit crunch has led to sharp drop in inter-bank lending.

Bonds and notes issued between June and September also dropped to about $296, less than half the amount seen in the previous quarter, BIS said.

UBS follows Citigroup Inc., the largest US bank, in taking on strategic investors to bolster capital. The US bank last month got a $7.5 billion cash infusion from Abu Dhabi to replenish capital after record mortgage losses wiped out almost half its market value.

UBS also plans to sell 36.4 million treasury shares that it previously intended to cancel, raising about 2 billion francs, and proposes to replace the 2007 cash dividend with stock, boosting capital by 4.4 billion francs. The bond sale and dividend replacement will have to be approved by shareholders at a meeting in mid-February, the bank said.

The bank''''s losses already cost the jobs of chief executive 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, reports said.

With $2.6 trillion of assets invested, UBS had reported a net profit of $9.9 billion in 2006.

UBS, based in Zurich, Switzerland, operates in more than 50 countries and employs more than 80,000 people worldwide.

UBS officials are due to address investors and analysts tomorrow about the bank''''s prospects.