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UBS shares fall after news of share issue

SHARES in UBS AG fell yesterday morning after the Swiss bank announced overnight that it expects to raise 3.8 billion Swiss francs (US$3.5 billion) through a capital increase and forecasts a loss for the second quarter.

The bank's shares opened higher, but soon dropped back and were 1.7 percent lower at 13.73 Swiss francs at the end of the first hour of trading.

The Swiss Financial Market Supervisory Authority (FINMA) welcomed the capital increase through the sale of authorized capital, saying it underscores the bank's recovery of its capital market ability.

"This is certainly positive," FINMA spokesman Tobias Lux told The Associated Press. The bank's ability to absorb any shocks has been improved, he said.

UBS said late Thursday it is offering 293.3 million new shares from authorized capital to a small number of institutional investors for 13 francs apiece.

The Finance Ministry welcomed the move and said in the bank's interest until August 4 it will hold back on the sale of any of the UBS shares created from convertible bonds it controls from the rescue package of last year.

UBS said its move helps strengthen confidence in the bank and was in line with the view of regulators.

"UBS is taking this action now in order to take advantage of current market opportunities," a bank statement said. "This is not related to any particular event."

But analysts at Zuercher Kantonalbank said they interpret the UBS move as a sign of pessimism on the part of the management.

The bank made the announcement of the share offering after saying it expects to post a net loss of an undisclosed amount for its second quarter when it announces its results on August 4.

The bank said the operating result for the quarter is expected to represent an improvement compared with the first quarter, largely attributable to better market conditions affecting its investment bank and a reduction in losses and writedowns on legacy risk positions.

"Net new money has been negative in the three wealth and asset management divisions in the quarter to date," said a UBS statement.

Zuercher Kantonalbank analysts said the statement leaves open whether the bank will record an operating loss in addition to the net loss already previewed.


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