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UBS ready to buy back toxic asset fund

  • The bank set up the so-called Stabilization Fund in 2008 to deal with its toxic assets. Under the terms of its rescue deal with the SNB, UBS has the right to buy it back for $1B plus half the fund's equity once the central bank's rescue loan has been repaid.
  • With the loan confirmed as repaid this week, the next step is for an independent determination of what the fund's equity is worth - it's expected to take about 3 months, says the SNB.
  • UBS expects the repurchase to boost its Basel III core tier one capital ratio by 70-90 bps and improve its leverage ratio by 25 bps as the value of the option will no longer be deducted from regulatory capital.
  • The bank transferred a total of about $38.7B of paper into the vehicle with the SNB providing a loan for capital. After initial losses, the fund has turned to profits along with the improved markets, earning $830M in H1.
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