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January 1, 2009

UBS sells stake in Bank of China

by Gill Montia

Story link: UBS sells stake in Bank of China

Swiss investment bank, UBS, has sold its stake in Bank of China to institutional investors.

The bank disposed of 3.4 billion Bank of China shares through a discounted placing that is reported to have been profit making.

UBS acquired its interest in Bank of China in 2005 for around $500 million.

At the time the banks were working towards a strategic cooperation that would cover the development of investment banking and securities products and services for Chinese clients.

The proceeds of the sale will no doubt be used to bolster UBS’s balance sheet, which has so far taken writedowns of almost $49 billion in relation to the credit crisis.

The bank has also warned that it could take a further $5.13 billion hit in the final quarter of 2008, despite having posted a small third-quarter profit.

In October, the Swiss National Bank (SNB) agreed to help reduce UBS’s exposure by allowing it to transfer $60 billion of illiquid securities and other balance sheet assets to a separate fund entity, under the control of SNB.

This enabled UBS to limit possible future financial damage from certain assets and enhanced its prospects of securing long-term funding.

 

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