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terça-feira, maio 05, 2009

UBS Sale of Brazil Unit Boosts Capital After Loss; Shares Rise


UBS Sale of Brazil Unit Boosts Capital After Loss; Shares Rise

By Elena Logutenkova

May 5 (Bloomberg) -- UBS AG, the European bank with the biggest writedowns

from the financial crisis, posted a first- quarter loss and said capital

grew more rapidly than the company estimated, boosting its shares in Swiss


UBS rose as much as 5.7 percent in Swiss trading after saying the sale of

its Brazilian unit will raise the Tier 1 capital ratio, a gauge of its

ability to absorb losses, to 11 percent. The bank posted a net loss of 1.98

billion Swiss francs ($1.75 billion), matching an estimate provided on

April 15.

"UBS has a good level of capitalization with the outlook for a Tier 1 ratio

increase to 11 percent and we believe in the strength of the balance

sheet," Teresa Nielsen, an analyst at Vontobel Holding who rates UBS "buy,"

said in a note today.

Chief Executive Officer Oswald Gruebel has announced 7,500 job cuts,

replaced two executive board members and sold the Brazilian business since

he was hired in February. UBS may shed more assets, Chief Financial Officer

John Cryan told journalists on a conference call today.

UBS rose 72 cents, or 4.6 percent, to 16.43 francs by 11:18 a.m. in Swiss

trading, compared with a 3.8 percent increase in Bloomberg's European banks

index. UBS gained 11 percent this year, trailing the 57 percent advance in

Credit Suisse Group AG, which surpassed UBS as the largest Swiss bank by

market value.

'Right Direction'

UBS said last month that its Tier 1 ratio was "roughly 10 percent" at the

end of March, and that the sale of the Brazil operations would increase it

by about 0.6 percentage point.

The higher ratio reported today makes an "equity capital increase even less

likely," said Peter Thorne, an analyst at Helvea in London who rates UBS


UBS has amassed more than $50 billion in losses and writedowns, the most of

any European bank in the credit crisis, and had to raise more than $32

billion in fresh capital from investors, including the Swiss government.

Gruebel told shareholders at the annual meeting last month that restoring

profitability is UBS's "most urgent" task as it tries to regain the

confidence of clients and investors. Bad loan provisions may rise further

this year as the global economy deteriorates, UBS said today.

"Gruebel is heading in the right direction, but he still has his work cut

out for him," said Wolfgang Matejka, who oversees about $3 billion as chief

investment officer at Meinl Bank in Vienna. "To lose your reputation is

easy but to regain it is a hell of a job."

'Continuing Headwinds'

UBS reported a $1.7 billion markdown tied to bond insurers, or monolines,

and 1.14 billion francs in credit-loss provisions in the first quarter. The

bank also booked a 631 million-franc goodwill impairment on the sale of the

Brazil unit.

"At the investment bank and the Swiss bank there will be continuing

headwinds in relation to credit extension," Cryan said. Leveraged finance

commitments "remain one of our concern areas and risk concentrations,

together with monolines."

The investment-banking division narrowed its pretax loss to 3.16 billion

francs in the quarter from 18.2 billion francs in the year-earlier period.

Profit at the wealth management and Swiss bank unit fell 45 percent to 1.1

billion francs, while wealth management Americas and asset management

reported pretax losses of 35 million francs and 59 million francs,


UBS resumed setting aside funds for bonuses in the first quarter despite

the loss, Cryan said. "Bonuses will remain a part of the total remuneration

package and we'll have to continue to pay them," he said.

The latest round of job cuts at UBS, the fifth since the credit crisis

began and the largest since the 1998 merger that created the bank, will

help save as much as 4 billion francs by the end of next year. Gruebel, 65,

is reviewing UBS operations and may exit some "high-risk" businesses and


Asset Sales

UBS will take a charge of about 650 million francs in the second quarter

for reorganization measures and severance costs, up from 184 million francs

in the first quarter.

"There are some relatively small businesses -- I'm not talking about

divisions -- which are not really core to us, and which we could look to

sell in the course of the year," Cryan said, adding there is "nothing in

the works at the moment."

UBS aims to reduce the workforce by about 4,000 from year- end levels at

the wealth management and Swiss bank division, by 2,500 at each the

investment banking and wealth management Americas units, and by about 500

each in asset management and in the corporate center.

"These are important steps that had to be taken, and it's clear that these

measures couldn't have been taken by the old management," said Marco Bider,

a fund manager who helps oversee about $7 billion, including UBS shares, at

Banque CIC in Basel. "Gruebel doesn't owe anyone anything at the bank."

Changes in Management

Gruebel replaced Marcel Rohner, 44, who left the bank after holding the CEO

post for 19 months. UBS shareholders elected former Finance Minister Kaspar

Villiger, 68, as chairman of UBS's board of directors last month. He

replaced Peter Kurer, 59, who left after a year in the job amid a probe

into whether UBS helped wealthy Americans evade taxes.

UBS reached a settlement in February with U.S. authorities that required

the bank to hand over the names of about 300 American clients.

Customers withdrew 23.4 billion francs from the main wealth management and

Swiss bank unit in the first quarter. Clients at wealth management Americas

added 16.2 billion francs in the period after the bank hired 400 new

brokers in the fourth quarter. The units saw a net outflow of 123 billion

francs in 2008.

'Image Problem'

"It's not only a question of bringing the company back into the black, it's

a question of credibility," said Raoul Paglia, a fund manager at BSI SA in

Lugano, who helps oversee about $62 billion, including UBS shares. "They

have an image problem. They have to try to restore it."

UBS dropped off the list of the 100 most valuable brand names in the latest

annual ranking released by Geneva-based Millward Brown Optimor last week.

The brand was ranked 64th last year and 51st in 2007.

Gruebel last month hired Ulrich Koerner, 46, as chief operating officer,

tapping a former colleague who helped him turn around Credit Suisse six

years ago and replacing Walter Stuerzinger, 53, UBS's chief risk officer

between 2001 and October 2007.

UBS named Alexander Wilmot-Sitwell, 48, and Carsten Kengeter, 42, co-heads

of the investment bank last week, replacing 52-year-old Jerker Johansson

after a year on the job.

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