September 15, 2008 / 6:55 AM / 11 years ago

UBS shares hit by speculation of new writedowns

ZURICH (Reuters) - Shares in Swiss bank UBS AG took a new tumble on Monday, falling further than a hard-hit banking sector after reports it will have to write down another $5 billion on its risky investments in the second half of the year.

A logo is pictured on the Swiss bank UBS headquarters in Zurich August 12, 2008. REUTERS/Christian Hartmann

News that lack of liquidity had forced U.S. investment bank Lehman Brothers LEH.N to file for bankruptcy protection dragged down financial sector stocks worldwide.

Without quoting sources, Swiss paper Sonntags Zeitung said UBS UBSN.VX, Europe’s hardest hit bank in the financial market turmoil, would have to write down another $5 billion on its risky investments in the second half.

The paper said it expected UBS to update the market before an October 2 shareholder meeting. UBS declined to comment.

“The bad news is that the banking crisis is not over and that there are still lots of bad credits around,” Claude Zehnder, head of research for technical trading at Zuercher Kantonalbank, said.

“Also, the possibility has arisen this weekend of further writedowns,” he added.

UBS announced last month writedowns had climbed a further $5 billion in the second quarter to top $42 billion, and said it was splitting the investment bank that had dragged it into the red from its core wealth management business.

UBS shares were down 10.1 percent at 21.14 Swiss francs at 0815 GMT, underperforming the DJ Stoxx European banks index .SX7P, which was down 5.8 percent. UBS shares had rallied recently after losing two-thirds of their value in the last year.

UBS’s immediate rival Credit Suisse CSGN.VX was down 6 percent at 49.50 Swiss francs.

Both UBS and Credit Suisse declined to comment on their banks’ potential exposure to Lehman Brothers.

A source close to UBS told Reuters the bank’s exposure to Lehman was “small”, but would not elaborate further.

U.S. HEADACHE

Separately, the Financial Times reported the bank was close to clinching a deal with U.S. authorities over allegedly helping wealthy U.S. citizens to avoid paying taxes by hiding assets in Switzerland.

UBS was trying to reach a deal with the U.S. Justice Department and regulators within the next two weeks, in time for the shareholder meeting, the Financial Times reported on Monday, citing well-placed UBS sources.

“UBS is treating these investigations with the utmost seriousness and continues to work diligently with both Swiss and U.S. government authorities in an effort to achieve a satisfactory resolution of these matters,” a UBS spokesman said.

In May, the U.S. Department of Justice and the Securities and Exchange Commission revealed they were investigating UBS’s conduct in relation to cross-border services provided by UBS advisers to U.S. clients from 2000 to 2007.

Swiss Finance Minister Hans-Rudolf Merz has warned UBS not to breach Swiss banking secrecy rules by handing over client details to U.S. authorities investigating tax evasion.

Reporting by Emma Thomasson and Lisa Jucca; Additional reporting by Ajay Kamalakaran in Bangalore; Editing by Quentin Bryar and Sue Thomas

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