Times Online: UBS chairman exits as bank seeks urgent £7.57bn (*Shell CFO Peter Voser is a director of the crumbling bank UBS)

April 1, 2008
Patrick Hosking, Banking and Finance Editor

UBS chairman Marcel Ospel fell on his sword this morning as the Swiss banking giant announced a humiliating SwFr15 billion (£7.57 billion) rights issue to shore up its crumbling balance sheet.

The bank revealed that it had lost a further $19 billion (£9.6 billion) in US real estate and related structured credit positions, bringing the total damage from the US subprime implosion to around $37 billion.

The fresh injection of capital is fully underwritten by J P Morgan, Morgan Stanley, BNP Paribas and Goldman Sachs and follows a SwFr13 billion capital injection only four months ago from the Singaporean Government fund GIC and a mystery Middle East investor.

Peter Kurer, the bank’s inhouse general counsel was named as successor to Mr Ospel, who has been a towering figure in European banking for more than a decade.

“I have always stated that I ultimately take responsibility for the bank’s situation,” he said this morning.

After the fresh subprime losses, UBS posted an estimated first-quarter net loss of SwFr12 billion.

Heavy job losses at UBS in London, a key part of the investment banking arm, look inevitable.

“Clearly the industry is in a very difficult environment and we have to review the capacity with which we operate in this environment,” said UBS chief executive Marcel Rohner. “We will expect to be more specific with respect to all these measures in due course over the next weeks to come.”

UBS shares were expected to fall when dealings begin later this morning. The new rights issue represents a major dilution of existing shareholders. UBS plans to boost its share capital from the current SwFr207 million by up to SwFr125 million, an increase of up to 60 per cent. Details on price have yet to be decided.

Sergio Marchionne, UBS vice chairman and head of Fiat, paid tribute to Mr Ospel: “The events since the summer of 2007 have affected the bank to an unexpected degree and have proved a great challenge for management and the board of directors. Marcel Ospel resolutely led the bank through these difficult times and made a decisive contribution to solving its problems.”

UBS also announced plans to ring-fence its remaining toxic assets in a portfoilio work-out unit: This would initially be wholly owned by UBS but the plan is to reduce the bank’s exposure to it, whilst avoiding a fire sale of the assets at severely distressed prices

Mr Rohner, who was himself elevated to chief executiive last July after the ousting of Peter Wuffli, said UBS was weathering one of the most difficult periods in the history of banking.

“I believe this capital increase and the creation of a separate vehicle to separate problem assets from the remainder of the business will allow us to return to sustainable value creation over time.”

UBS said first quarter performance in most other parts of the bank was “acceptable”.

http://business.timesonline.co.uk/tol/business/article3658290.ece

*Headline comment in brackets added by John Donovan

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