UBS completes $38.7 billion transfer of toxic assets to state fund
03 Apr 2009
Switzerland's biggest bank, UBS, has transferred its final installment of toxic assets to a special state aid fund, bringing the total to $38.7 billion, the Swiss central bank said Friday
The volume of illiquid assets isolated in the "Stabfund" is just over two-thirds of the $57 billion ceiling announced when the Swiss government unveiled the emergency aid package last year. The Swiss National Bank had already cut the size of the funds to be purged in February after deciding that some types of assets, such as securities backed by student loans, did not need to be transferred to the fund.
Most of the final installment of $22.2 billion was securities, loans and derivatives linked to property markets in the United States, Europe and Japan, the SNB said in a statement. Independent assessors set the price, which is $700 million lower than the book value of $22.9 billion estimated by UBS in September 2008, the central bank said. UBS said the transaction would result in a $300 million charge against its first-quarter results.
The Swiss government granted UBS the aid package last year to stabilise the Swiss financial markets and curb the crippling fallout from the bank's heavy exposure to the US sub-prime or higher risk home loan crisis. The fund will run for 8-12 years during which the assets will be progressively sold off, with any profit beyond the first 1 billion Swiss francs ($879 million) being shared between the Swiss National Bank and UBS.
UBS rose as much as 4.1 per cent in Swiss trading, and was up 20 centimes, or 1.7 per cent, to 12.02 francs by 2:41 p.m. The stock has fallen 73 per cent since the start of last year.
UBS has announced 11,000 job cuts and amassed more than $50 billion in write-downs and losses since the beginning of the financial crisis. The losses forced it to raise more than $32 billion in capital from investors, including the Swiss government. It posted a 20.9 billion-franc loss for 2008 and said last month it remains ''extremely cautious'' about the outlook for this year. (See: $27-billion Q4 loss compels UBS to slash 2,200 investment-banking positions / Credit Suisse rescues itself, UBS gets funds infusion)
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