UBS raises $3.5 billion in share sale, expects further loss

Bloomberg

The bank sold 293.3 million shares for 13 francs apiece to a "small number of institutional investors," the Zurich-based company said late Thursday. UBS shares closed at 13.97 francs in Zurich trading.

The capital increase is aimed at boosting confidence in the bank, UBS said after reporting renewed withdrawals of client funds from all of its money-managing divisions in the second quarter. Switzerland’s central bank said last week the bank needs to further increase capital and cut assets to meet stricter requirements.

"The capital raise is consistent with what we’ve seen from other banks," said William Fitzpatrick, a financial-industry analyst at Optique Capital Management in Milwaukee, which manages $900 million and doesn’t hold UBS stock. "The loss is a surprise to me. Market conditions have been very favorable for the investment banks in the second quarter."

The bank said the second-quarter loss is mostly tied to reorganization costs and charges on the company’s own debt, while operating earnings improved from the first quarter on improved market conditions. The bank is scheduled to publish detailed second-quarter earnings on Aug. 4.

Banks raise cash

In the U.S., lenders including Bank of America Corp. and Wells Fargo & Co. have raised more than $75 billion by selling shares or converting preferred stock into common shares since early May, when regulators demanded some of the banks bolster their capital.

The Swiss National Bank said last week that UBS and smaller rival Credit Suisse Group AG need to increase the amount of capital they hold in relation to assets to withstand any further losses.

The banks should aim for a leverage ratio of at least 5 percent once the crisis is over, the SNB said. UBS’s ratio was 2.56 percent at the end of March. UBS has amassed more than $53 billion in writedowns and losses since the credit crisis began and had to raise about $34 billion before this announcement from investors including the Swiss government to replenish capital.