UBS AG, the European bank hardest hit by the US subprime contagion, fell as much as 3.7 per cent in Swiss trading after saying it may face more losses from mortgage securities.
UBS declined 94 centimes, or 3.1 per cent, to 29 Swiss francs by 11.28am in Zurich, the biggest slump among the 59 companies on the Bloomberg Europe Banks and Financial Services Index. UBS has dropped 42 per cent this year, cutting its market value to 63.3 billion Swiss francs (€39.14 billion).
The bank, in the prospectus for its €9.9 billion rights offer published after markets closed on May 23rd, said its losses on non-US residential and commercial real-estate securities last year and in the first quarter of 2008 "could increase in the future."
UBS is also evaluating whether to limit or discontinue one or more of its US reference-linked note programs, which "could result in a charge to income," it said.
UBS is seeking to replenish capital after about $38 billion in writedowns related to the US subprime crisis. The bank still has more than $45 billion in US mortgage-related assets, $8.6 billion in leveraged finance commitments and $10.4 billion in US student loans on its books.
The company hasn't said how much it holds in non-US mortgage securities.
UBS's net exposure to reference-linked notes was $8.9 billion at the end of March.