UBS raises higher than expected Sfr16bn

UBS yesterday launched a bigger-than-expected Sfr16bn (7.8bn) rights issue to shore up its balance sheet but analysts warned that the capital boost had only begun to draw a line under the woes of Switzerland's biggest bank.

The bank said last month that it would raise about Sfr15bn. Some analysts took the extra Sfr1bn as a sign that UBS needed more to bolster its financial strength. About half the extra funds are said to cover up to Sfr263m of underwriters' fees plus taxes and other expenses.

UBS has raised capital to maintain confidence in its flagship wealth management business after its investment bank's losses on fixed-income assets threatened the bank's financial stability. Dirk Hoffmann-Becking, an analyst at Bernstein, said: "The underlying problem with the investment bank will continue. It will take them years for them to become a wealth manager with a small, client- focused investment bank. It is hard for [wealth management] relationship bankers at UBS to explain that they are good at managing money even though the bank has lost one-and-a-half times the GDP of Iceland."

UBS said it would offer shareholders seven new shares for every 20 held at Sfr21 a share, a third below Wednesday's closing price and 25 per cent less than the theoretical ex-rights price of Sfr28.14. Investors were relieved the bank had not set the level at a feared Sfr17-20 range.

Peter Thorne, an analyst at Helvea, said: "They have still got lots of legacy positions on their balance sheet. They still have to regain the confidence of their clients and employees."

Trading in the new shares will start on 13 June. The rights issue is fully underwritten by JPMorgan, Morgan Stanley, BNP Paribas and Goldman Sachs.

UBS shares rose 1.1 per cent to Sfr30.98. The stock has dropped 38 per cent this year.

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