Clues to the UBS outlook in the mail

Sometime in the next five days, UBS shareholders will receive a letter with the agenda for next month’s annual meeting of Switzerland’s biggest bank.

Rather than being destined straight for the waste bin, the procedural details this time should warrant closer attention for what they might reveal about Europe’s biggest casualty of the subprime crisis.

Already, a small pension fund has tabled a motion for a SFr10bn ($9.9bn) rights issue to help UBS address possible further writedowns on its securities linked to US residential mortgages.

Another capital raising may seem superfluous after last month’s approval for steps to raise SFr19bn in funds, mainly through a SFr13bn injection from strategic investors in Singapore and Saudi Arabia. But Profond, a SFr2.5bn pension fund for small and medium-sized Swiss companies, thinks more cash is needed to address the bank’s looming new losses.

The prognosis for UBS is bad. Credit Suisse, its arch rival and a bank so far relatively unscathed by the US meltdown, last week warned of a probable first quarter loss. While business at its big investment bank had been profitable in January and February, turmoil in March made red ink highly likely, it warned.

Although their models are not identical, the prediction sent a shiver through all banks exposed to US credit markets – UBS especially. Better-than-expected figures from Wall Street had suggested the worst might be over. But the US quarter ended in February: Credit Suisse was the first to talk of March, and its words cast a long shadow.

Analysts had already been leap-frogging each other with estimates for additional writedowns that UBS might have to make this year, based on fast deteriorating markets. The maximum of $21bn may be extreme. But many respected analysts have settled for the $15bn-$16bn range. UBS has not commented, and its next scheduled disclosure is not until first quarter results on May 6.

In such an information vacuum, the AGM of April 23 has grown unusually important. Herbert Brändli, chairman of Profond’s board of trustees, says he has been told his motion will be on the agenda. More important, Mr Brändli says he has been told privately by the bank that another capital increase will be necessary – confirming the view of many in the market that only an additional infusion of funds will suffice to maintain the capital ratios UBS requires to protect the crucial blue chip image of its powerhouse private banking business.

What will be decisive is the gloss UBS puts on its AGM agenda. Officials only say for now that the motions are being weighed up and shareholders will be informed of the board’s recommendations in due course. When that letter comes – probably at the beginning of next week – investors should give it a thorough read, before, as in the past, throwing it in the rubbish.

Orascom’s Swiss choice

Altdorf (population 8,450), capital of Uri, is hardly a top tourist, let alone business, destination. Yet the small Swiss canton, which boasts no hotel with more than three stars, is to become the financial heart of one of the world’s most ambitious hotel and property groups.

Orascom Hotels and Development, the Egyptian company best known for its built-from-nothing holiday towns on the Red Sea and soon well beyond, has selected the humble Swiss provincial capital as a bridgehead in Europe. The news accompanied Tuesday’s announcement that the group had created a new holding company, to be listed in Switzerland, that would take a majority stake in its already quoted Egyptian vehicle.

Recognition should increase as the company – one of three Orascoms specialising in telecommunications, construction and tourism respectively – pursues its $500m-plus dream to turn Andermatt, a sleepy Swiss ski resort just up the road from Altdorf, into the next Saint Moritz. That, at least is the ambition of Samih Sawiris, OHD’s chairman, chief executive and majority shareholder.

Laughing off Mr Sawiris may be a mistake. Similar claims for El Gouna, OHD’s first project, came largely true. The Red Sea town now has twice as many inhabitants as Altdorf, and critics are probably eating their words.

Mr Sawiris is the second of three entrepreneurial brothers who have, separately, expanded enormously the companies they inherited from their legendary father, Onsi Sawiris, Egypt’s best known businessman.

But before too many European inward investment officers start fuming about yet another canny corporate catch by the Swiss, they should note that OHD’s decision to locate in unlikely Altdorf had nothing to do with tax. As a group facing only minimal fiscal burdens in most places it operates, Mr Sawiris says his priority was to make sure the tax bill didn’t rise, not drive it down further.

european.view@ft.com