Swiss banking and wealth management group UBS faces further losses but much of the news about the bank’s credit-related problems have now emerged, giving it the chance to stage an eventual recovery, US investment bank Morgan Stanley said.

Morgan Stanley has an “equal weighting” stance on UBS. However, it continues to prefer holding the rival Swiss bank Julius Baer, it said in a note by senior analyst Huw Van Steenis .

"Our thesis is that much of the bad news is on the table and new management is looking for a decisive change with the past,” the note said.

It said that in 2009, about four-fifths of UBS’s earnings will come from the asset management and wealth management segments.

Morgan Stanley has a price-to-earnings valuation on UBS, based on expected 2008 earnings, of 9 times earnings, falling to 7.1 next year and 6 times in 2010.

“We hope the stock should start to find a degree of support - in part from slowing outflows in wealth management... But we think the overhang of potential further losses from the SFr2 trillion [$1.95 trillion]balance sheet, which still has material structured credit exposure, means the stock will struggle to perform strongly in ensuing quarters until we get a sense of reaching a peak in credit - which we still don't feel will be until 2009,” the note said.