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Daily Telegraph: UBS chairman to quit as bank seeks £7.6bn (*Shell CFO Peter Voser is a UBS director: crisis hit bank made ‘huge bets’ which came upstuck)

Google image Peter Voser Shell/UBS director

Peter Voser Shell/UBS director

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By Richard Blackden and Philip Aldrick
Last Updated: 8:19am BST 01/04/2008

UBS has unveiled plans to raise 15bn Sfr (£7.6bn) by selling new shares as the Swiss banking giant scrambles to repair a capital base savaged by the US sub-prime crisis.

The bank also announced that chairman Marcel Ospel will no longer stand for re-election to the board later this month and will be replaced by Peter Kurer, who currently serves as chief legal counsel.
 
Mr Ospel’s departure, and the rights issue, comes as the lender revealed a net loss of 12bn Sfr for the first quarter after taking a write-down of 19bn Sfr on its sub-prime related investments.

Deutsche Bank said this morning that it was expecting to make additional sub-prime-related write-downs of €2.5bn (£2bn) for the first quarter because market conditions had “become significantly more challenging during the last few weeks”. It will report its first quarter results on April 29.

UBS’s huge bets on sub-prime investments have already cost former chief executive Peter Wuffli, finance director Clive Standish and Huw Jenkins, the former head of the lender’s investment banking arm, their jobs.

However, a number of shareholders, led by Swiss pension fund Profond, have already indicated they would support a rights issue by the bank. Many were dismayed that UBS sought a Sfr13bn capital injection from the Singaporean sovereign wealth fund GIC and a Middle Eastern investor earlier this year, thereby diluting existing investors’ stakes, after suffering an initial $18bn write-down last year.
  
UBS has been the biggest European casualty of the financial crisis that began in America’s sub-prime mortgage market. The bank explained today that it had “segregated” the bulk of its sub-prime related investments into what it described as a “portfolio work-out unit”.

According to UBS, the move is designed to “reduce its exposure in a way that reduces the effect of distressed market conditions on the core business.”

Historically not one of the biggest risk-takers in the financial world, UBS said it has substantially reduced its current level of risk.

The terms of the rights issue have yet to be decided, the bank said, adding that JPMorgan, Morgan Stanley, BNP Paribas and Goldman Sachs have agreed to underwrite it.

UBS, the biggest wealth manager, ran into trouble after being forced to write off more than $18bn (£9.1bn) in sub-prime losses. This triggered a loss for 2007, the first since UBS became a bulge-bracket firm almost 10 years ago.

The rights issue is the latest in a string from the world’s biggest banks as they try to bolster their capital base and get lending again. Lehman, which has been the subject of intense speculation about a possible capital shortfall of its own, also announced plans to raise at leat £1.5bn selling shares as it seeks to dispell those concerns.

The New York-based bank’s offering of 3 million convertible shares is “an endorsement of our balance sheet by investors”, Lehman’s chief financial officer, Erin Callan, said.

Meanwhile at UBS, Mr Ospel said the reversal of his decision to stand for re-election at the bank’s annual general meeting on April 23 is because “I have always stated that I ultimately take responsibility for the bank’s situation.”

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/04/01/bcnubs201.xml

*Headline comment in brackets added by John Donovan

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