UBS to write down $10 billion, raise $11.5 billion in stake sale

10 December 2007

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).