Switzerland withdraws its ownership in UBS, 1st in Europe to act this way

image According to sources, Switzerland pocketed 1.2 billion Swiss francs, or $1.13 billion, as it sold its investment in one of the worst-hit banks during the crisis UBS AG, which has written down about $50 billion in the value of so-called toxic assets. The Swiss government is the first in Europe to declare that a major crisis-hit bank was fit enough to have state ownership withdrawn. The move comes less than a year after Switzerland pumped six billion francs into the lender as part of a rescue package.

Switzerland converted on Thursday a note that gave it a 9.3% UBS stake and immediately sold the 332.2 million shares at 16.50 francs each, a 1.4% discount to the stock’s closing price Wednesday. The Swiss government earned an annualized return of 30% on the 10-month investment. Credit Suisse Group AG`s Swiss investment-bank head Marco Illy said: "This stabilization program is notable as it is the first program thus far to clearly demonstrate that it has generated attractive returns for the capital that was invested by tax payers." Credit Suisse, which advised the government on how to exit from UBS, was in charge of the sale alongside UBS and Morgan Stanley.

The UBS offering, which came one day after Switzerland and the U.S. formally settled a tax spat with UBS at the center, was well received by investors. Shares were placed with institutional investors in the U.S., the U.K., Switzerland and elsewhere in Europe. A second leg of the UBS rescue package was the outsourcing of remaining toxic assets to a fund managed by the Swiss National Bank. This fund continues to be managed by the central bank.

The Swiss government, which made the decision to sell the shares together with the central bank and financial regulators, was eager to free itself from the UBS stake, provided the bank was stable enough to begin restoring itself alone. On Wednesday, the government said that the U.S. tax deal and UBS’s strong capital have worked toward restoring trust in the bank, meaning the government’s goals have been fulfilled. "The transaction meets the government’s two principal objectives, which were to secure proceeds which represent an adequate return for the taxpayer and to engineer an appropriate exit once the government, in conjunction with the SNB and FINMA, were of the conviction that UBS has been stabilized," Credit Suisse’s Mr. Illy said.

UBS`s chairman and a former Swiss finance minister Kaspar Villiger said the exit is an acknowledgment of the bank’s restorative measures so far. Besides, Mr. Villiger thanked the government, the SNB and the Swiss Financial Market Supervisory Authority, or Finma, for their "prudent and resolute course of action" from October through Thursday.

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