Swiss bank UBS has said it cannot predict the final impact of the US sub-prime mortgage crisis.
It said a new capital injection would strengthen its position as it called on shareholders to support planned investments from Asia and the Middle East.
UBS's made the appeal in a letter to shareholders released this morning. It came after the New York Times reported that US bank Merrill Lynch was expected to suffer $15 billion in losses stemming from soured mortgage investments.
The Swiss bank is braced for what looks set to be a stormy shareholder meeting on February 27 when it will seek approval for a capital increase, resulting in the sale of a 9% stake to the Singapore government and around 1.5% to an unidentified Middle East investor.
UBS said it had decided against undertaking a rights issue to raise capital on the grounds of cost, complication and time.
The Swiss bank has been one of the biggest casualties of the collapse in the US sub-prime mortgage market, which resulted in billions of dollars in writedowns by banks in the value of their securities portfolios. In December, UBS announced a new $10 billion writedown on its sub-prime related exposures, which came on top of an earlier charge of $4.4 billion.
'We cannot, at this time, accurately predict the future development of US residential mortgage markets and therefore the ultimate impact on our positions in sub-prime mortgage related securities,' the letter said.
Last month, the Government of Singapore Investment Corporation (GIC) and a Middle East investor pumped $11.7 billion of fresh capital into UBS by agreeing to subscribe to a mandatory convertible bond. UBS said it was confident its capital position would now remain strong even if the US housing market continued to deteriorate.
