Swiss bank UBS shares edge up after US deal

UBS's share price stuttered ahead on Thursday after the announcement of a deal to settle a bruising US government lawsuit, while Swiss authorities decided to sell their stake in the troubled bank.

UBS's share price rose by 0.7 per cent to 16.85 Swiss francs in early trading (0744 GMT), lagging behind the general rise in the Swiss Market Index of 0.9 per cent.

"The evolution is still volatile because of speculation over the state's holding," a Zurich trader said.

The Swiss government announced overnight that it would convert the nine per cent or six billion Swiss franc holding it took last October under a rescue plan to prop up the country's banking flagship in the financial crisis.

 

The resulting 322.2 million shares will be sold to institutional investors, the Federal Council said in a statement.

The loss-making banking heavyweight was one of the hardest hit as credit markets froze and stock markets slumped last year in the wake of the collapse of US bank Merril Lynch.

"The Board of Directors and the executive management of UBS would like to thank the Swiss Confederation, the Swiss National Bank and (financial regulator) FINMA for their prudent and resolute course of action from October 2008 to this day," UBS Chairman Kaspar Villiger said in a statement.

Bern's move came a few hours after it announced a deal on Wednesday with US authorities that should allow UBS to escape charges of assisting tax evasion in the United States without a fine or compensation payment.

In a lawsuit earlier this year, US authorities had accused the Swiss bank of "systematically and deliberately" violating American laws by promoting offshore accounts for American citizens, targeting up to 52,000 US clients.

Under the combined deals between the Swiss and US governments, and an out-of-court settlement between the Swiss bank and US tax and justice authorities, the Swiss agreed to process a US request for information on 4,450 UBS clients who are suspected of tax fraud.

The litigation in the United States, which followed a $780 million (euro 587 million) fine on UBS in a similar tax-related case in February, has weighed on the bank.

However, the Zurich trader said the latest out-of-court deal was only likely to have a "short term" impact on UBS's share price.

"It's good news for UBS, but operators are waiting to see at what price the state's stake will be offered," he added.

UBS reported a net loss of 1.4 billion Swiss francs (euro 916 million, $1.32 billion) for the second quarter of 2009 and has been struggling to keep customers on board.