Bloomberg News

UBS Cut to ‘Equal-Weight’ by Morgan Stanley on Restructuring

October 03, 2011

(Updates with stock price in fifth paragraph.)

Oct. 3 (Bloomberg) -- UBS AG’s stock rating was cut by Morgan Stanley, which said investors might be too optimistic on the time it will take the Swiss bank to restructure.

Analysts Huw van Steenis and Hubert Lam cut the Zurich- based bank to “equal-weight” from “overweight” in a note to clients today. They also reduced the stock’s price target to 13 Swiss francs from 15 francs.

UBS, revamping operations after a $2.3 billion loss from unauthorized trading, may have to cut risk-weighted assets by about 100 billion francs ($110 billion), the analysts said. The loss also may prevent the bank from granting shareholders sizable dividends over the next three years, they said.

As other wholesale banks may also seek to shrink their balance sheets by as much as 2 trillion euros ($2.7 trillion) over the next 18 months in response to funding pressures, it may take UBS three to five years to shed assets, the analysts said. They said they expected no profit from UBS’s investment bank this year.

UBS shares fell 3.4 percent to 10.18 Swiss francs by 5 p.m. in Zurich trading, after dropping as much as 5.1 percent earlier.

--Editors: Chris V. Nicholson, Julie Alnwick

To contact the reporter on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net


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