Swiss government sells 9-per cent stake in UBS for $6.8 billion

The Swiss government has sold its 9-per cent stake in UBS AG, Switzerland's largest bank, for around $6.8 billion, earning over $1.1 billion, following the agreement signed between Switzerland and the US over suspected tax evasion by UBS clients.

Under the landmark agreement signed on Wednesday, US will withdraw a lawsuit filed against UBS in Miami, and in return UBS will provide information on 4,450 accounts of American clients as part of the US Internal Revenue Service's (IRS) clamp down on tax evaders.
(See: US breaches Switzerland's banking citadel; UBS to reveal 4,450 names)

The government yesterday sold its 332 million UBS shares at $15.51 (16.50 Swiss francs) a share, for approximately $5.1 billion. Including the compensation of around $1.7 billion due on account of the mandatory convertible notes it received while buying the share stake, the total proceeds amount to about $6.8 billion.

The compensation will be paid on 25 August on conversion of the convertible notes into shares.

Last October, the Swiss government injected 6 billion francs ($5.6 billion) to bail out the troubled bank. The Swiss banker has also placed its toxic assets totaling $38.7 billion in a special state aid fund in April.

The government stake, offloaded to institutional investors, was oversubscribed 4.5 times. Credit Suisse Group AG, Morgan Stanley and UBS managed the placing.

UBS' Tier 1 capital ratio-financial strength indicator-which is a measure of core capital on the bank's balance sheet as a proportion of risk adjusted assets, climbed to 13.2 per cent as on 30 June, compared with 10.5 per cent in March. Total capital ratio also rose to 17.7 per cent from 14.7 per cent for the same periods, both representing adequate financial strength.