Shares in UBS hit a 12-month low and were suspended twice yesterday, the last day of trading the rights for the Swiss bank's SwFr16 billion (£7.9 billion) capital raising. The bank's stock was buffeted by further losses at Lehman Brothers, reports that UBS was due to make a second-quarter loss and concerns that the rights issue would be badly under-subscribed.

Banks and investors that had waited for the last day to decide whether to participate dumped huge amounts of rights on the Zurich stock exchange. A technical glitch meant that they could not be matched immediately with buyers and the exchange was forced to suspend trading in the stock twice while it auctioned the spare rights.

UBS shares dropped 9 per cent to SwFr22.41 each, hitting a 52-week low, before closing down 3.25 per cent at SwFr23.82. Investors have been offered the opportunity to buy seven new shares for every 20 they hold, pricing the new shares at SwFr21 each.

Sentiment surrounding Switzerland's largest bank is low, with speculation rife that a lack of confidence in UBS's management meant investors were reluctant to exercise their rights.

UBS appointed a new chief executive, Marcel Rohner, last year and earlier this year replaced Marcel Ospel, the chairman, with Peter Kurer, a little-known company insider. The bank has been the worst hit of the European banks in the credit crunch, reporting more than $37 billion (£18.75 billion) in writedowns.

An analyst said that UBS had yesterday paid the price for general nervousness in the banking sector. In the UK, HBOS, Barclays and Royal Bank of Scotland were the FTSE 100's biggest fallers, while in the US Lehman Brothers said that it was expecting a $2.8 billion loss in the second quarter of 2008.

Meredith Whitney, the widely read Oppenheimer analyst, added to UBS's woes with a report saying that she believed that UBS would, with Merrill Lynch and Citigroup, take a further $10 billion hit from their exposure to monoline insurers.

Last week Standard & Poor's stripped MBIA and Ambac, two of the biggest monolines, of their AAArating, immediately devaluing the insurance bought by the banks from the monolines. UBS had $6.3 billion worth of exposure to the monolines in the first quarter.

Mr Rohner said last month that the bank did not expect to make a writedown in the second quarter as large as those in the first, when it took a $19 billion hit. UBS will publish its second-quarter figures on August 12.

The rights issue is UBS's second attempt to plump up its capital cushion. In February GIC, the Singaporean wealth fund, and an unnamed Middle Eastern investor pumped SwFr13 billion into the bank.

UBS will reveal later this week the take-up of the rights issue, which is underwritten by JPMorgan, Morgan Stanley, BNP Paribas and Goldman Sachs. Trading in the new shares will start on June 13.

Trading timetable

May 26 closing date for UBS shareholders to be eligible for new shares

May 27 UBS shares begin trading ex-rights, subscription period starts

June 9 rights trading ends

June 10 subscription period ends in the United States

June 12 subscription period ends in Switzerland

June 13 first day of trading new shares

June 17 payment and delivery of new shares

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