UBS has revised its outlook for the fourth quarter from an overall group profit to an overall loss.

UBS has revised its outlook for the fourth quarter from an overall group profit to an overall loss and says that it may now record a net loss for the full year because it has revised its assessment of its exposure to sub-prime mortgage pools upwards and will increase write downs by a further $10 billion. Recent comments from analysts have implied that a weakening capital base caused by investment banking losses may have a detrimental effect on UBS’s wealth management business. In response, the Swiss bank has increased its capital base by adding SFr19.4 billion of BIS Tier 1 capital, SFr13 billion of which is new capital. It will also bolster its position by selling treasury shares, and by replacing its 2007 cash dividend with a stock dividend. The new issues have been placed with strategic investors, the Government of Singapore Investment Corporation, with SFr11 billion, and an undisclosed strategic investor in the Middle East with SFr2 billion. In a statement, UBS says that as the basis for its wealth and asset management business, UBS wishes to maintain a very strong capital base under all circumstances. But the statement also reassures that growth in net new money continues, with inflows in Global Wealth Management & Business Banking totalling about SFr30 billion in October and November of this year. The issue of new capital will be in the form of mandatory convertible notes and will be subject to the approval of UBS shareholders at an extraordinary general meeting which will take place in mid-February 2008. The move will give UBS a BIS Tier 1 ratio of above 12 per cent. This ratio was 10.6 per cent at 30 September 2007. Marcel Ospel, chairman, UBS said: "Our losses in the US mortgage securities market are substantial but could have been absorbed by our earnings and capital base. Nevertheless, it is important to always maintain a notably strong capital position to support the continued growth of our wealth management business, which is the largest generator of value to UBS shareholders. “We are delighted to welcome these new long-term strategic investors to UBS. Singapore is already an important hub for the wealth management industry in general, and for UBS in particular, and we look forward to a fruitful partnership in the years to come. “In future, we will make certain that our investment banking operations grow by concentrating on serving the needs of institutional and corporate clients, and on maximising synergies with wealth and asset management." Marcel Rohner, group chief executive officer, confirmed that UBS would continue with all three major areas of its business despite the dramatic downturn in investment banking, although he did signal a downgrading in its importance to the group as a whole. He said: "The combination of wealth management, asset management and investment banking in one integrated business remains the best model to grow our share of client business in each of these areas, and to capture both cost and revenue synergies. But in the future, investment banking growth initiatives will be expected to earn an appropriate risk-adjusted return on capital over an entire cycle, as well as being synergistic with the rest of UBS. To ensure this happens, we will continue to implement measures to reposition the Investment Bank in line with UBS group strategy."