ZURICH (Reuters) - Straitened Swiss bank UBS AG said on Wednesday it had sold its stake in Bank of China at a discount to institutional investors and would book a gain of a “few hundred million dollars” in the fourth quarter.
UBS is struggling to repair its balance sheet after massive investments into risky U.S. assets forced it to make nearly $49 billion of write-downs, more than any other European bank.
Bank of China spokesman Wang Zhaowen said the sale would have no impact on the bank’s financial status and operations.
UBS said it offloaded about 3.4 billion Bank of China H-shares through a discounted placing.
The world’s biggest wealth manager paid $500 million for a 1.6 percent stake in China’s second-largest lender in 2005 before it went public in 2006. Foreign investors who took bigger stakes at the time included Royal Bank of Scotland and Temasek Holdings.
Philip Higson, UBS head of investor relations, said the shares were sold at a discount to Bank of China’s closing price on Tuesday, but declined to say by how much.
Dow Jones news agency said UBS sold the shares to 15 investors at a 12 percent discount, raising $835 million, citing people familiar with the situation.
UBS said it had made a gain on the sale of “a few hundred million dollars” which it would book in the fourth quarter although it would only have a marginal positive impact on the bank’s Tier I ratio, a key measure of financial strength.
UBS posted a small third quarter profit, mainly due to tax credits and a revaluation of its own debt, but warned it could take a multi-billion hit in the final quarter of 2008.
UBS’s Higson said the weakening dollar and the level of market volatility would have a much bigger impact on the bank’s Tier I ratio in the quarter than the Bank of China stake sale.
FEAR OF FOREIGNER RETREAT?
Bank of China shares closed trading down 3.2 percent at 2.120 Hong Kong dollars ($0.274) compared with a 1.1 percent firmer benchmark Hang Seng Index.
UBS said it remained committed to its business relationship with Bank of China and to its businesses in China as a whole. Bank of China’s Wang said the stake sale would not harm cooperation with UBS.
There has been growing investor concern that RBS, Bank of America Corp, Citigroup and other western banks could unload their holdings in Chinese lenders in order to shore up their books amid the deepening global crisis.
But Bank of China said on Wednesday its other major foreign investors -- including its largest foreign shareholder RBS -- had no plans to sell their stakes after the UBS move.
Hong Kong’s Apple Daily said earlier this month that Bank of America, which owns 19.13 percent of China Construction Bank, aims to trim its stake in the Chinese lender worth up to $3 billion. The report was later denied by the U.S. bank.
There has also been talk that Citigroup, damaged by the crisis, may consider selling its shares in Shanghai Pudong Development Bank after a lock-up period expires this month.
Additional reporting by Xie Heng in Beijing; Editing by David Cowell
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