The word was out earlier today that UBS was going to take a stunning first quarter writedown of $18 billion (the total turned out to be $19 billion), far and away the largest credit crunch writedown to date.
But for my money, the attention-getting number is the quarter’s net loss in relation to equity: $12 billion, in comparison to a book value of SFr 35.6 billion as of year end (the dollar and Swiss Franc are more or less at parity these days). That’s 1/3 of the big bank’s equity. No wonder my trader buddies put UBS high on the list of Firms at Risk of Serious Trouble.
The bank will raise 15 billion francs ($15.1 billion) in fresh funds from shareholders to replenish capital, Zurich-based UBS said in an e-mailed statement today.
Now if you were a shareholder, would you be so keen to give more equity to a business that lost a third of its net worth in a mere three months? UBS got a capital injection of Sfr 19 billion last year, much of it from friendly sovereign wealth funds. I’m sure they’ll be delighted to stump up more cash.