Swiss Sell UBS Stake, Net $1.1B Profit

The Swiss government said Thursday it made a profit of 1.2 billion Swiss francs ($1.1 billion) from the sale of its stake in UBS AG, a day after concluding a deal that appears to end the bank's yearlong tax-evasion battle in the United States.

The government exercised its mandatory convertible notes for 332.2 million shares and then sold them at 16.50 francs each, for a total of 5.48 billion francs, the Finance Ministry said.

The stake went to unidentified institutional investors in Europe, North America and the Middle East, Peter Siegenthaler, director of the Swiss Federal Finance Administration, told state-owned radio DRS.

In addition to the money from the sale, UBS also paid the government 1.8 billion francs to buy back interest coupons that would have been due in 2011.

The government had bought the notes for 6 billion francs last October as part of a $42 billion rescue package for the former financial powerhouse hard hit by the U.S. subprime mortgage crisis and the ensuing global economic downturn.

The decision to sell the stake was announced late Wednesday, hours after the government signed an agreement with the United States under which UBS will of 4,450 American clients suspected of hiding assets in Swiss accounts. In return, Washington agreed to drop a civil case against the Swiss bank seeking the handover of some 52,000 client names.

The disclosure is likely to prod some wealthy Americans to before the IRS has a chance to prosecute them for tax evasion.

UBS shares closed up 4.5 percent at 17.50 francs ($16.32) on the Zurich exchange Thursday.

Analysts at Zuercher Kantonalbank said the settlement with the United States and the Swiss government's ending of its investment were welcome as an important first step toward repairing the bank's damaged reputation.

As a result of the government sale, the share capital of UBS will increase to 355.8 million francs from 322.6 million francs, the bank said. Conversion and the capital increase are expected to take place Aug. 25.

The bank said it regards the government's decision to sell the shares as an acknowledgment of the measures taken by the bank to restore its health.

"The Board of Directors and the executive management of UBS would like to thank the Swiss Confederation, the Swiss National Bank and FINMA (financial regulators) for their prudent and resolute course of action from October 2008 to this day," said Board Chairman Kaspar Villiger.