The desperate scrabble for cash among the world’s best-known banks continued last night as UBS prepared to raise about SwFr13 billion (£6.5 billion) and Lehman Brothers about $3 billion through rights issues.

UBS is raising the new cash to plug a gap in its balance sheet that has been left by a further $18 billion of sub-prime mortgage-related losses in the first quarter.

The new share issue would come only weeks after UBS agreed a SwFr 13 billion cash injection from GIC, a Singapore Government sovereign wealth fund, and an unnamed Middle Eastern investor. UBS’s first capital injection was needed to fill another $18 billion loss, relating to the fourth quarter of 2007.

Meanwhile, in a sign of just how jittery investors have become about almost any group with exposure to the credit markets, Lehman said that it did not actually need the money that it is planning to raise.

Instead, Lehman, which is widely rumoured to be the most cash-strapped bank on Wall Street, said that it was issuing three million preferred convertible shares for purely psychological reasons.

Erin Callan, Lehman’s chief financial officer, said: “We still maintain that we don’t need capital, but we’ve realised that perception is the dominant issue in today’s markets. This is an endorsement of our balance sheet by investors.”

Mr Callan pointed out that Lehman has nearly $100 billion of cash and other liquid assets and that it can borrow up to $200 billion from the US Federal Reserve if need be.

Last month the Fed extended its “discount window” of cheap loans from commercial banks to include brokerages such as Lehman Brothers for the first time.

The capital raisings will bring the total amount of cash injections in the past few months to about $120 billion.

Sovereign wealth funds, many of them run by governments in East Asia and the Middle East, have been among the biggest investors in investment banks such as Citigroup, Merrill Lynch and Bear Stearns.

A UBS spokesman declined to comment on the rights issue, although he did concede that the issue would be discussed at its annual shareholder meeting this week.

The latest writedown and capital raising will add to the pressure on Marcel Ospel, the bank’s chairman and former chief executive, to step down as chairman. He has so far refused to resign, despite mounting pressure, on the basis that he is, he contends, the best-placed person to rescue UBS.

UBS’s expected $18 billion first-quar-ter writedown will make it by far the biggest European casualty of the credit crunch. However, by some analysts’ estimates this prediction may fall short, with some predicting a first-quarter writedown of as much as $26 billion.

Lehman said that the new shares that it issued would offer 7 per cent to 7.5 per cent interest and that the conversion premium would be 30 per cent to 35 per cent above the current stock price.

Lehman’s shares fell nearly 5 per cent in after-market trading on Wall Street last night to end the day at $35.85, as investors feared that the new issue would dilute their holdings in the bank.

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BACKGROUND

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