The cloud of uncertainty hanging over the credit markets was thrown into sharp relief yesterday as UBS told investors that it still could not be sure about the full financial impact of the credit crunch.

UBS is preparing for writedowns of $13.4 billion (£6.8 billion) against its exposure to the downturn in American sub-prime mortgages.

The Swiss bank wrote to investors yesterday telling them that it could not rule out having to record further losses. “We cannot, at this time, accurately predict the future development of US residential mortgage markets and therefore the ultimate impact on our positions in sub-prime mortgage related securities,” the bank told investors in a letter signed by Marcel Ospel, the chairman, and Marcel Rohner, the chief executive.

Analysts said that UBS’s uncertainty about its financial position underscored the wider nervousness about the credit markets, amid predictions of a fresh round of losses when banks begin to report full-year results in coming weeks.

Alex Potter, at Collins Stewart, said: “I think in general terms that it is still clear that it will get worse before it gets better. In short: expect more writedowns.”

UBS was writing to shareholders to try to secure support for a SwFr13 billion (£6 billion) capital injection from a Singapore sovereign wealth fund and a mystery Middle East investor. Late last year the bank said that the Government of Singapore Investment Corporation would inject SwFr11 billion for a stake of about 9 per cent. An unnamed investor from the Middle East, thought to be the Saudi Arabian Monetary Agency, would contribute a further SwFr2 billion for an additional small shareholding, it said.

Some shareholders objected to the terms of the financing, which involves the issuance of securities convertible into UBS shares. They threatened to vote down the deal at a special meeting next month unless they were given more details.

Stating its case for the investment, UBS admitted in its letter that it had considered a rights issue to stabilise the balance sheet when it realised it was heading for heavy losses. It rejected this on the grounds of “cost, complication and time”.

The bank said that it also feared international credit agencies might down-grade its ratings as a result of the losses. This would weaken its funding position and drive up its cost of borrowing on wholesale money markets.

UBS acknowledged that it had concerns about the possibility of “unease” among clients and stakeholders because of the extent of its suffering at the hands of the market turbulence.

“In view of these adverse market developments, it became increasingly evident that substantial additional writedowns would be required,” the bank wrote, in reference to the sustained money market liquidity crisis in October, November and December. “We then knew that we faced the risk that the sheer size of these numbers, the resulting reduction in our capital ratios and any remaining uncertainty about the ultimate value of our positions could lead to an increased unease for clients and other stakeholders.”

UBS has been among the investment banks hardest hit by the credit crunch and has maintained that it needs the capital injection to shore up its financial strength. “During 2008, the environment for financial markets, especially in the US, is uncertain, and we need to manage through this period from a position of financial strength,” it said.

A spokesman for the bank said it was not concerned about the possibility of a shareholder rebellion. He said that UBS was updating investors about the terms of the financing and the letter was in line with its desire to be transparent. Investors accounting for two thirds of the share capital need to approve a capital issue in order for the funding to go ahead.

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