Bloomberg News

Swiss Stocks Climb; Holcim Advances, UBS Sinks on Trading Loss

September 15, 2011

Sept. 15 (Bloomberg) -- Swiss stocks rose for a third day as gains by Credit Suisse Group AG and Holcim Ltd. outweighed a slump in UBS AG after the country’s largest lender said it made a $2 billion trading loss because of unauthorized trading.

“There are two key areas of damage that are happening to UBS here,” said Alastair McCaig, a trader at World Spreads Ltd. in London, in a Bloomberg Television interview. “You have the market capitalization and the effects on the profitability of the company, but you’ve also got reputational damage. The extent of both of these will be dictated by how many trades this was.”

The Swiss Market Index increased 0.3 percent to 5,433.48 at the 5:30 p.m. close in Zurich as the European Central Bank, the Federal Reserve and the Bank of Japan said they will lend dollars to euro-area banks to ensure they have sufficient holdings of the U.S. currency until the end of the year. The broader Swiss Performance Index climbed 0.5 percent.

The SMI slumped 29 percent from this year’s highest level in February through the gauge’s low on Aug. 10 amid concern that global economic growth is slowing and Europe’s debt is spreading. The gauge has since rebounded 13 percent after the selloff dragged the price-earnings ratio to 10.7 times the estimated earnings of its constituent companies, according to data compiled by Bloomberg. The average ratio over the last five years was 14 times earnings.

UBS plunged 11 percent to 9.75 Swiss francs, its lowest since March 2009. The bank said it may book a loss in the third quarter as a result of the unauthorized trading. No client positions were affected, the Zurich-based bank said in a statement today.

Unauthorized Trading

UBS said it “discovered a loss due to unauthorized trading by a trader in its investment bank. The matter is still being investigated, but UBS’s current estimate of the loss on the trades is in the range of $2 billion.”

The loss is “manageable at the group level, but is obviously not helpful for sentiment and confidence in the bank’s risk management following the near-death experience of 2008-09,” Andrew Lim, a bank analyst at Banco Espirito Santo SA in London, wrote in an e-mail. The slide in UBS’s stock price “is an overreaction, given that a $2 billion loss represents 5 percent of 2011 estimated shareholders’ equity.” Lim maintained his “buy” recommendation on the shares.

Credit Suisse gained 5.8 percent to 21.69 Swiss francs. Transocean Ltd. advanced 1.8 percent to 50.90 francs and Holcim climbed 3.2 percent to 46.36 francs.

Zurich Financial Services AG, Switzerland’s biggest insurer, added 4.5 percent to 173 francs after naming Pierre Wauthier as chief financial officer.

Implenia AG gained 2.8 percent to 21.80 francs after announcing that a consortium it leads had won a 100 million- franc ($115 million) order from Swiss Railways SBB.

--Editors: Will Hadfield, Jennifer M. Freedman

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net


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