UBS shares hit new low on U.S. tax probe fallout

ZURICH (Reuters) - Shares in Swiss banking giant UBS fell to a new all-time low on Monday, dropping below 10 Swiss francs after a barrage of criticism over the lender’s handling of a U.S. probe into tax fraud.

People walk past the UBS building on Park Avenue in New York February 19, 2009. REUTERS/Chip East

UBS, the world’s largest banker to the rich, agreed last week to pay a $780 million fine and disclose the identity of about 300 of its U.S. clients to avert criminal charges it was facing under the U.S. investigation.

“As a consequence of the ongoing ‘political turmoils’ and power demonstrations of some countries’ political leaders, we expect increased volatility for Swiss banks’ shares until more clarity arrives,” said Rainer Skierka, analyst at asset manager Sarasin.

The UBS settlement was backed by the Swiss government, but experts said it opened cracks in Switzerland’s famous bank secrecy laws, and UBS is still facing a civil case in which U.S. authorities are seeking access to the names of another 52,000 clients.

A host of countries have already expressed their concern over losing tax revenue because of havens such as Switzerland, which alone manages nearly one third of an estimated $7 trillion of global offshore wealth.

British finance minister Alistair Darling was quoted on Sunday as saying Switzerland must make its tax system more open.

British Prime Minister Gordon Brown is hoping a G20 summit of developed and developing nations in London on April 2 will give leaders the chance to agree on tougher regulatory and taxation rules as part of reforms to shore up the financial system.

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Swiss newspapers were full of criticism of UBS Chairman Peter Kurer and Chief Executive Marcel Rohner at the weekend.

A UBS spokesman rejected reports on Sunday that suggested that Kurer and Rohner had been aware of illegal offshore structures, saying neither U.S. nor Swiss authorities were accusing them of this.

Shares in UBS fell 7.6 percent to 10.17 francs by 8:01 a.m. EST, just above a low of 10.00 hit earlier on Monday. This compared with a 1.1 percent rise in the Dow Jones index of European bank stocks.

“Market sentiment toward UBS has reached a clear low. The weakening of bank secrecy and the negative press following it continue to keep the stock and the bank’s top management under heavy pressure,” said a Switzerland-based trader.

UBS stock is now worth just a seventh of its value two years ago, before it was hit by the subprime mortgage-related crisis and ensuing economic downturn.

Other Swiss banks were also under pressure. Private bank EFG, which is due to publish results on February 25, was down 13.2 percent after hitting its lowest level since its stock market listing in 2005.

The country’s second-largest bank, Credit Suisse lost 5.0 percent and Bank Sarasin, which is publishing results on February 26, was down 7.8 percent.

Shares in bank Vontobel, another Swiss private bank, initially bucked the negative trend but lost ground later in the session and were down 1.7 percent.

Additional reporting by Lisa Jucca and Sam Cage, editing by John Stonestreet and Rupert Winchester