Lukewarm response to UBS deal

People enter the building of the Swiss bank UBS in Midtown Manhattan in New York City on Wednesday. UBS will release over 4,000 names of American account holders as part of tax-evasion settlement and investigation by American authorities. Photo: AFP

A deal to settle Swiss bank UBS's bruising US lawsuit met with a lukewarm reaction from experts on Thursday, while the Swiss government decided to sell the stake it took in the troubled bank last year.
"A sword of Damocles is still floating over UBS," analysts at Zurcherkantonalbank (ZKB) cautioned.
On Wednesday the bank and the Swiss government signed complex agreements with US authorities that should allow UBS to escape charges of assisting tax evasion in the United States without a fine or compensation payment.
The Swiss agreed to process a US request for information on 4,450 UBS clients who are suspected of tax fraud, in return for the eventual end to a US lawsuit against the bank.
"Some important points still need to be cleared up," said Andreas Venditti of ZKB.
After a hesitant start, UBS's share price rose by 3.2 percent to 17.28 Swiss francs by 1116 GMT, outpacing the general rise in the Swiss Market Index of 1.1 percent.
"The evolution is still volatile because of speculation over the state's holding," a Zurich trader said.
The US deal was "good news for UBS, but operators are waiting to see at what price the state's stake will be offered," he added.
Analysts at Helvea said it was unclear if UBS might face further criminal proceedings in the longer term and avoid a penalty or other litigation relating to tax fraud cases.
"It is not really a clean ending," commented Peter Thorne of Helvea. "It could all be a messy process."
The Swiss government also announced overnight that it would convert the nine percent or six billion Swiss franc holding it took last October under a rescue plan to prop up the country's banking flagship in the financial crisis.
The resulting 322.2 million shares will be sold to institutional investors, the Federal Council said in a statement.
Loss-making UBS was one of the hardest hit as credit markets froze and stock markets slumped last year in the wake of the collapse of US bank Merril Lynch.
"The Board of Directors and the executive management of UBS would like to thank the Swiss Confederation, the Swiss National Bank and (financial regulator) FINMA for their prudent and resolute course of action from October 2008 to this day," UBS Chairman Kaspar Villiger said in a statement.
Analysts at Vontobel bank welcomed that step, saying it allowed UBS greater flexibility as it sought to rebuild.
"The disengagement is a positive signal that shows the confidence of the Swiss government," said Vontobel's Stefan Schuermann.
Bern's move came a few hours after it announced the out-of-court and diplomatic settlements on Wednesday with US authorities.
But the overall reaction in Swiss media was lukewarm.
The Neue Zürcher Zeitung (NZZ) said the agreement appeared "at first sight to be to Switzerland's advantage."
But it remarked that the deal between Bern and Washington would make many UBS clients nervous and turn themselves in to US authorities of their own accord.
Le Temps said it represented "an American victory."
In a lawsuit earlier this year, US authorities had accused the Swiss bank of "systematically and deliberately" violating American laws by promoting offshore accounts for American citizens, targeting up to 52,000 US clients.
The legal wrangling in the United States, which followed a 780 million dollar (587 million euros) fine on UBS in a similar tax-related case in February, has weighed on the bank.
UBS reported a net loss of 1.4 billion Swiss francs (916 million euros, 1.32 billion dollars) for the second quarter of 2009 and has been struggling to keep customers on board.