UBS writes down $10 billion, Singapore injects capital

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Singapore is taking 9 percent of UBS in a deal that mirrors action taken by U.S.-based Citigroup two weeks ago. Citi expects to write off between $8 billion and $11 billion and secured funding from the Abu Dhabi Investment Authority.

Europe's fourth biggest bank also raised the possibility it will make its first full year loss in a decade.

"In our judgement these writedowns will create maximum clarity on this issue and will have the effect of substantially eliminating speculation," said UBS Chief Executive Marcel Rohner.

The writedown follows a 4.2 billion Swiss franc ($3.7 billion) hit that UBS suffered at the end of October which was also related to U.S. subprime mortgages - loans made to high-risk homebuyers who were later caught out by rising interest rates and are now defaulting on payments.

UBS said it expects a fourth quarter loss and warned that it may even make a loss for 2007 as a whole. This would be the bank's first full-year operating loss since 1996, when UBS and Swiss Banking Corporation, with which it merged two years later, were both hit by losses in the Swiss mortgage market.

The bank also said it would replace a proposed cash dividend with a stock-based payout for 2007 instead of a cash payment, and said it would scrutinise its investment bank business thoroughly and weed out low-profit divisions.

UBS's shares initially fell almost 3 percent as investors took fright at the anticipated dilution of their share of earnings. They later recovered on relief that the worst of UBS's subprime woes could be over, and closed 1.4 percent higher at 58 Swiss francs.

Credit rating agency Fitch Ratings cut its ratings of UBS by one notch to AA and said only the bank's swift action to raise capital had prevented a more savage downgrade.

9 PCT FOR SINGAPORE

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