UBS announced the largest loss in Swiss corporate history on Tuesday as European bank most damaged by the credit crisis said it lost close to SFr20bn in 2008.
But its shares rose as traders pointed welcomed the rise in the bank’s tier 1 capital ratio, the benchmark measure of a bank’s capital strength, making any further rights issues less likely. UBS’s stock rose 7.7 per cent to SFr13.90.
“Short-term, the focus for us in respect to UBS is less the fourth quarter losses, but…the very high net outflow in Wealth Management despite the improvement in January”, said Kian Abouhossein of JP Morgan. “Long-term, the focus is on how safe net asset value is with assets at risk maintained, and US tax litigation issue a concern due to the unpredictability of potential ‘hit’ on net asset value and Tier 1”.
Trading volumes in UBS were significantly higher, with more than twice the amount of shares trading hands as the total amount traded on Monday. By mid-afternoon around 40 million shares had traded against an average daily volume of 25 million, a move explained by traders as driven by those who had sold UBS short ahead of Tuesday’s results buying the shares back.
Peer Credit Suisse meanwhile gained 1.8 per cent to SFr31.46 ahead of its full year results announcement due tomorrow.
Nordea Bank, one of the largest Nordic banks by market value, said it would become the third Swedish bank to raise extra capital since the onset of the credit crisis via a €2.5bn rights issue. An additional half a million euros will be raised through Nordea Bank cutting its dividend, the bank said. Its shares fell 3.3 per cent to SKr49.80.
Peer Svenska Handelsbanken rose 7.9 per cent to 126.25 after announcing better-than-expected full year results. Fourth quarter net profit was SKr6.4bn against SKr6.4bn in same period in 2007, while consensus forecasts were around SKr2.8bn.
KBW cut its price target for Svenska Handelsbanken and maintained its “underperform” rating. “While we believe that SHB will manage this downturn better than most banks, we have difficulties in justifying the valuation premium”, KBW said. “With the bank’s expansion into the UK and Denmark we believe the bank’s risk profile has increased significantly”.
In the wider market the pan-European FTSE Eurofirst 300 index fell 1.2 per cent to 819.82. Frankfurt’s Xetra Dax lost 1.5 per cent to 4,598.10, and the French CAC 40 index fell 1.5 per cent to 3,086.71.
Trading volumes remained thin ahead of US treasury secretary Timothy Geithner’s announcement on the Obama administration’s plan to stabilise the US banking sector.
French bank’s were among the biggest drags on the Eurofirst, with BNP Paribas falling 0.9 per cent to €29.14, Société Générale losing 3.6 per cent to €28.80, and Credit Agricole down 3.2 per cent to €9.09.
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