UPDATE 1-UBS could afford to pay $5.5 bln in U.S. tax row

* Bank in no immediate need to rebuild capital ratios

* Tier 1 ratio improving as bank cuts risky assets

* Additional capital boost coming from Pactual sale

* Tax deal seen as positive, but problems remain (Adds comment from UBS in paragraph 14)

By Lisa Jucca, European Wealth Management Correspondent

ZURICH, July 8 (Reuters) - Swiss bank UBS (UBSN.VX) may be able to pay up to $5.5 billion to end a damaging U.S. tax dispute without needing an immediate cash injection, thanks to a recent capital increase and proceeds from asset sales.

U.S. authorities have accused UBS (UBS.N) of helping wealthy Americans hide $15 billion of untaxed money and are trying to force it to hand over 52,000 client names.

A court hearing is due on Monday and UBS may end up paying large amounts to end the row.

UBS announced late in June it had raised 3.8 billion Swiss francs ($3.5 billion), improving its Tier 1 capital cushion to 11.9 percent of risk-weighted assets, or an estimated 33 billion Swiss francs, from 10.5 percent on March 31.

But UBS said its Tier 1 ratio would likely already be above 12 percent as it has cut risk-weighted assets from nearly 277.8 billion Swiss francs on March 31.

BZ Bank analyst Matthias Duerr said a fine of 5 billion Swiss francs ($4.59 billion), the top of the range of what Swiss media have said UBS may pay, would cost about 200 basis points, or 2 percentage points, thus keeping UBS above the 10 percent Tier 1 ratio benchmark.

"The capital cushion of the bank would be gone, but they would not need immediate further capital," Duerr said.

Analysts see a Tier 1 ratio of 10 percent as the minimum for a solid capital base. Although such a level would be comparable with Deutsche Bank's (DBKGn.DE) 10.2 percent, UBS' capital base would look weak in comparison to a Tier 1 ratio of more than 14 percent at rival Credit Suisse (CSGN.VX).

But UBS is under little pressure to rebuild its Tier 1 ratio as Swiss financial regulator FINMA has given the two Swiss banks until 2013 to further boost their capital base.

Other analysts say that depending how the fine is calculated, UBS could have room for an even higher fine.

"In the case of a pre-tax payment of $1 billion, the resulting impact on the Tier 1 ratio would be 28 basis points," said Commerzbank analyst Michael Dunst, who expects UBS had a Tier 1 ratio of 12 percent at the end of the second quarter.