UBS shares wobble as bank wraps up second capital hike

By John O'Donnell

FRANKFURT (Reuters) - Shares in Switzerland's UBS wobbled on Monday as the bank's rights issue stuttered towards the finishing line.

UBS -- once a rock of Swiss financial prowess but now Europe's biggest loser in the global financial turmoil -- is concluding a rights issue to repair its ravaged finances.

But investors have found it hard to muster enthusiasm for extra stock in a bank which has burned its way through $37 billion (18.7 billion pounds) in writedowns during the credit crisis.

Since the start of the rights trading, the bank's shares have tumbled by around 17 percent to about 24 Swiss francs, a signal many see as a thumbs down for management. The subscription price for the new shares has been set at 21 francs.

"All the people I have met are so unhappy with what's happened," said Helvea analyst Peter Thorne. "There is no confidence in the management or the company's strategy. I cannot see them investing more money in UBS.

"The traditional shareholders for UBS would be growth funds investing in private banking but in the low risk category. The new shareholders are recovery funds. And the recovery funds are driving a hard bargain."

As rumours swirled that the Swiss bank was heading for a loss in the second quarter, its shares dipped up to 9 percent on Monday. Trade in the stock and rights issue were both suspended later in the session while a mis-trade was investigated.

UBS shares were 4.1 percent lower at 23.60 francs by 1:34 p.m. British time and trade in the rights issue fell 27.8 percent to 0.91 francs.