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Published on 11/12/2007

ZURICH , Dec 10, 2007 (AFP) - Swiss bank UBS turned on Monday to Singapore 's state investment fund for nearly 10 billion dollars in new capital to fill a huge hole caused by losses in the US mortgage crisis.    UBS, a leading name in both Swiss and international banking, also warned it risked posting a net loss for the full year 2007 as a result.    "UBS has revised the assumptions and inputs used to value US subprime mortgage related positions. This will result in further writedowns of around 10 billion dollars," the bank said in a statement.    The bank also said it expected to post a loss in the fourth quarter, and "it is now possible that UBS will record a net loss attributable to shareholders for the full year 2007."    UBS also said that a strategic investor in the Middle East , which it did not identify, is injecting an additional two billion francs into the bank.    The Government of Singapore Investment Corporation (GIC) said it would inject 11 billion Swiss francs (6.6 billion euros, 9.74 billion US dollars) into UBS.    GIC's deputy chairman and executive director, Tony Tan Keng Yam, told a news conference that the fund's total shareholding could amount to 9.0 percent depending on the conversion price.    "Nine percent is a large stake. I think we would be the single largest shareholder in UBS," Tan said.    UBS chairman Marcel Ospel revealed in a statement: "Our losses in the US mortgage securities market are substantial."    The latest writedowns come after the bank reported its first quarterly loss for five years in October owing to exposure to the crisis-hit US mortgage market.    Ospel welcomed the Singapore deal, and said he did not rule out the new investors taking seats on UBS's board.    The identity of the second, Middle Eastern investor has not been disclosed.    The UBS chairman told a conference call that "the writedown should lead to more clarity and end all market speculation."    Analysts said that by announcing such a big writedown, UBS was hoping to preclude any further bad news arising from the subprime crisis.    Cazenove Equities said that the writedown was "aimed at removing the issue from the agenda once and for all".    Merrill Lynch meanwhile noted that UBS has "now moved from being the least conservative in its write-downs to being the most conservative".    "In our view this doesn't completely remove the debate on further write-downs, but it establishes UBS as the most conservatively marked," it said in a note to clients.    UBS shares staged a recovery in midday trade, as traders hoped this latest writedown would be an end to the matter.    At 12.44 pm (1144 GMT), UBS shares were up 1.55 Swiss francs or 2.7 percent at 58.75 Swiss francs, after opening down 3.2 percent.    GIC was established in 1981 to manage Singapore 's foreign reserves and now manages "well above" 100 billion US dollars, making it one of the world's largest fund management companies, its website says.    Sovereign wealth funds such as Singapore 's GIC are becoming major international finanical and corporate investors, prompting calls for greater transparency in their actions.    "Some SWFs are becoming large players in financial markets and their importance is set to go on increasing rapidly," the Organisation for Economic Cooperation and Development said last week.    The OECD said the many SWFs are viewed as "opaque and secretive ... [and] at odds with standards applied in global financial markets," and it called for codes of conduct such as those employed by Norway 's state investment fund.    GIC's managing director Ng Kok Song said the Singapore fund's investment was not aimed at securing total control of UBS.    "We've got no desire to control the business of the bank," but will seek to create maximum value for all shareholders, he said.

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