Switzerland to sell UBS stake
UBS shares open 2.2% higher
The Swiss government said it will sell its investment in Swiss bank UBS in the coming days and waive further coupon payments for a 1.8bn Swiss franc (€1.2bn) cash payment.
The government said Wednesday's finalised settlement to a legal dispute between Zurich-based UBS and the Internal Revenue Service, as well as the bank's ongoing restructuring efforts, represent steps toward stabilising UBS. Switzerland's financial regulator and central bank welcomed the move.
UBS said the sale, scheduled for August 25, will add 332,225,913 shares to its capital, which translates to an over 10% dilution. The move won't affect third-quarter earnings materially, but will shave 60 basis points off UBS' Tier 1 ratio at the end of June, which stood at 13.2%, the bank said.
For the government, the sale means an end to what was meant as a temporary stopgap in October, when a financial aid package, including the offloading of the bank's illiquid assets, was presented.
The government said the tax pact with the US, as well as strong capital at UBS, have worked toward restoring trust in the bank, meaning the government's goals have been fulfilled. The government is also eager to avoid meddling with UBS' day-to-day business, such as overseeing risk management measures and imposing salary caps.
UBS, as well as rival Credit Suisse, will still be subject to scrutiny from the financial regulator on pay, part of a raft of capital and other measures meant to toughen bank oversight in Switzerland.
The Swiss financial regulator and Swiss National Bank expressed similar sentiment as the government, saying the exit underscores UBS' resilience.
The SNB, which has been instrumental in pushing for tougher big-bank regulation in the wake of UBS' more than $50bn in writedowns, said it would continue to monitor UBS' development with an eye toward securing financial stability in Switzerland. Swiss giants UBS and rival Credit Suisse form the backbone of Switzerland's finance industry, which accounts for roughly 8% of the country's gross domestic product.
The SNB said the government withdrawal has no affect on StabFund, which is an SNB-managed vehicle holding UBS' illiquid assets. The SNB recently reported that losses in the fund dropped on the quarter, but still exceed UBS' equity contribution to the fund.
In a statement, UBS said it sees the government's exit "an acknowledgement of the measures the bank has taken so far to restore (the bank's) health."
---Write to Katharina Bart, Dow Jones Newswires; +41-43-443-8043; katharina.bart@dowjones.com
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