UBS sells commodities businesses to Barclays

The logo of Swiss bank UBS is pictured behind a traffic light, on a building in Zug in this October 17, 2008 file photo.

LONDON/ZURICH (Reuters) - Credit crisis-hit Swiss bank UBS said on Friday it has agreed to sell parts of its commodities businesses to Barclays Bank.

UBS said in a statement on Friday Barclays Capital is taking on its base metals, oil and U.S. power and gas businesses, which employ a total of around 100 people, for an undisclosed sum.

As part of an overhaul of its troubled investment bank, UBS announced in October it would exit most of its commodities business, including power and gas, agriculturals and base metals, while holding onto precious metals and index and exchange-traded commodities.

UBS, the world's largest wealth manager, is expected to post a 2008 annual loss of about 20 billion Swiss franc (12 billion pounds). It was Europe's hardest-hit bank in the credit crisis, which has forced it to make $49 billion (33 billion pounds) of writedowns and prompted state intervention.

The sale is another signal that UBS is trying to find alternative ways to raise capital in difficult market conditions after it tapped investors three times in the crisis and got a government cash injection in October.

"The fourth quarter has been very bad for UBS. They have raised capital three times already and they need to find capital some other ways," said Dirk Becker, an analyst at Kepler Equities.

The bank announced in December it was selling its Canadian energy operations and global agriculture business to J.P. Morgan Chase for an undisclosed sum. It said separately it had sold its stake in Bank of China for a gain of a "few hundred million dollars."

Its shares were up 4.4 percent at 14.09 Swiss francs, outperforming the broader DJ Stoxx European banking index, which was up around 3 percent by 10 a.m. British time.

FUTURE OF JOBS UNCLEAR

UBS described the units as part of its "non-strategic" commodities business.

Like other investment banks, UBS had expanded into high-risk/high-return commodities in recent years, but still only ranked in a second-tier group behind top players Goldman Sachs, Morgan Stanley and Barclays.

"This is a business UBS had been building up over the last couple of years. It was still in the set up phases," said Becker, adding it was difficult to put a price to the transaction.

UBS is a Category 2 or associate broker clearing member of the London Metal Exchange. It can operate through the 24 hour inter-office market.

The bank said it expected to complete the "full risk transfer" by end of the second quarter, subject to certain conditions being fulfilled.

However, the future of the jobs was still unclear. A spokesman said the U.S. power and gas desk employs around 70 people while there are around 10 on European oil and some 15 in the base metals business.

Staff could be made redundant, transferred to Barclays or appointed to other posts in UBS.

"Barclays will take some selective staff from U.S. power and gas and base metals. But it is not clear how many people they are going to take," the spokesman said.

The company exited some continental European power and gas markets earlier last year but maintained power and gas operations elsewhere in northwest Europe, Britain and North America. It also continued to trade in crude oil and refined oil products.

UBS has already announced about 9,000 job cuts, mostly in investment banking, to bring total headcount to under 80,000.

(Additional reporting by Emma Thomasson in Zurich, editing by William Hardy)