*ROYAL DUTCH SHELL CHIEF FINANCIAL OFFICER PETER VOSER HAS BEEN A DIRECTOR SINCE APRIL 2005 OF THIS SCANDAL HIT BANK WHICH IS IN A DEEP FINANCIAL CRISIS: HE IS A MEMBER OF THE UBS BOARD FACING MOUNTING CRITICISM OVER FAILURE TO IDENTITY HUGE EXPOSURE AND ITS SUBSEQUENT MISHANDLING OF THE CRISIS
By Haig Simonian in Zurich
Published: April 1 2008 07:18 | Last updated: April 1 2008 08:15
Marcel Ospel on Tuesday bowed to intense pressure and said he would not seek re-election as chairman of UBS, as Europe’s biggest casualty of the subprime crisis announced a further massive loss and its second capital increase in two months.
Mr Ospel, who has faced mounting criticism over his and the board’s failure to identify the bank’s huge exposure and its subsequent handling of the crisis, will be replaced by Peter Kurer, UBS’s general counsel.
The nomination of Mr Kurer, best known in Switzerland for his role during the collapse of Swissair, the former national airline, indicates a failure to find a more suitable replacement, in spite of intensive contacts with top bankers around the world.
Mr Kurer’s surprise nomination also suggests Mr Ospel had hoped to soldier on. In February, Mr Ospel made an initial, and apparently successful, attempt to deflect criticism by proposing that board members’ mandates be cut to 12 months from three years.
Mr Kurer will be formally confirmed at the bank’s shareholders’ meeting on April 23.
“I have always stated that I ultimately take responsibility for the bank’s situation”, said Mr Ospel in a statement. “We have worked very hard and have been able to address the firm’s most pressing problems.”
The decision came as UBS said it expected to lose a net SFr12bn ($12bn, €7.6bn) in the first quarter on the back of a further $19bn writedown on its US holdings. To maintain the high capital ratios considered essential for the group’s blue-chip private banking business, it will also make a SFr15bn rights issue.
The rights issue, which follows an earlier SFr13bn capital injection from strategic investors from Singapore and Saudi Arabia, will be fully underwritten by JP Morgan, Morgan Stanley, BNP Paribas and Goldman Sachs.
The moves will be accompanied by the creation of a new vehicle to manage UBS’s troubled US mortgage-related holdings, formalising an earlier segregation of many such assets into a what it called “work-out unit.”
In its profits warning on Tuesday, the bank forecast pre-tax earnings of about SFr2.1bn in wealth management and a decline in pre-tax earnings from asset management to about SFr300m. UBS expects the investment banking division to report a SFr18bn pre-tax loss for the first quarter.
Last year the Basle-based bank wrote off $18bn on its mortage-related holdings and reported a net loss for 2007 of SFr4.4bn.
The Swiss bank said on Tuesday its exposure to US residential subprime mortgage related positions fell to about $15bn from $27.6bn at the end of December, while exposure to slightly higher rated mortgages, the so called Alt-A assets, fell to $16bn from $26.6bn through a mixture of further writedowns and unspecified asset sales. While other risk positions were also reduced, holdings of auction rate certificates rose to $11bn from $5.9bn.
Crucially, the bank said it expected to report clients had continued to pump in new money into its wealth management business, in spite of severe fears about withdrawals following adverse publicity and the blow to its reputation. However, UBS predicted net outflows on its institutional asset management side.
UBS shares, which have fallen 83 per cent in the last 12 months, jumped 10 per cent in early Zurich trading on hopes the bank would not need any further writedowns.
Copyright The Financial Times Limited 2008
COMMENT IN CAPS ADDED BY JOHN DONOVAN