GIC sells part of UBS stake at loss

GIC UBS loss financial crisis sells stake

UBS' largest shareholder, Singapore's sovereign wealth fund, said it is trimming its stake in the Swiss bank to less than 3 percent.

GIC in late 2007 injected 11 billion Swiss francs ($10.2 billion at the time) into UBS, and in January 2008 said it would pump $6.88 billion into U.S. banking giant Citigroup (NYSE: C - news).

Now, the Government of Singapore Investment Corp., or GIC, will sell the bulk of its stake in UBS, into which it had poured 11 billion Swiss francs in 2007.

"GIC made the UBS sale despite the loss because conditions have changed fundamentally since GIC invested in UBS in February 2008, as have UBS' strategy and business", said Lim Chow Kiat, CEO of GIC.

Pointedly, GIC invested in Switzerland's biggest bank early during the financial crisis, purchasing debt that converted into stock when UBS needed capital to cover losses on subprime mortgage bonds.

It later added to this stake by subscribing to Sfr16 billion rights issue launched by the bank in May 2008, which left it holding more than a 9% stake in the lender. GIC had little joy with the investment, through convertible notes, initially: UBS was forced to accept a government-led rescue package one year later. The fund says its portfolio averaged nominal returns of 5.7 percent between 1996 and 2016. At this price, 93 million UBS shares are worth about US$1.55 billion. The Swiss bank was also involved in the billion-dollar graft probe into 1MDB, which is roiling Singapore's financial center.

In early 2010, when the conversion took place at a reported price of about 47.77 Swiss francs a share, UBS shares were trading at about 13 Swiss francs.

As a result, the sale of shares and remaining holding totals about 4.3 billion Swiss francs for GIC.

The secretive wealth fund was also bound to have been embarrassed as scandals - now largely resolved - including rigging of Libor precious metals prices and foreign exchange rates piled up at UBS. "As with all our investments, we continue to manage our position based on our assessment of the fair value of Citigroup and other investment opportunities", a GIC spokeswoman said in an email to Reuters today. That equates to a current loss of 4.1 billion francs from its investment, according to IFR calculations.

In the past year, GIC has embarked on a series of leadership changes and elevated many investment managers to key roles.

The notoriously secretive sovereign wealth fund dug in for the subsequent years, which went from bad to worse.

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