GIC takes “undisclosed” loss on UBS?

Source: twicepix/CC BY-SA 2.0Source: twicepix/CC BY-SA 2.0

I refer to the article “GIC pares stake in UBS at a loss; combined strategy with Citigroup sees positive return” (Straits Times, May 16).

It states that “GIC, Singapore’s sovereign wealth fund, which invested in UBS to support it during the 2008/09 global financial crisis, said it has cut its stake in the bank at a loss, partly because of changes in the lender’s strategy and business.

GIC sold a 2.4 per cent stake in the Swiss bank, paring its holding to 2.7 per cent from 5.1 per cent.”

How much was the loss?

In this connection, according to the article “GIC estimated to have lost at least US$7B of reserves in UBS investments” (The Independent SG, May 16) – “In all, GIC is estimated to have lost at least US$7 billion in UBS shares, assuming the remaining 2.7 per cent of UBS shares were also to be sold at current prices”.

With regard to “While saying that it was “disappointed” that its UBS investment resulted in a loss, GIC noted in its statement that its investment in US bank Citigroup, also made at the height of the global financial crisis, was in the black and that combined returns for UBS and Citi were positive in “mark-to-market terms” –

What is the annualised return on these two investments?

As to “We remain a shareholder of Citibank,” a GIC spokeswoman said in an email to Reuters on Tuesday (May 16).

GIC reduced its stake in Citi to under 5 per cent in 2009 from over 9 per cent but didn’t disclose subsequent holdings, said Reuters” – according to the article “Singapore sovereign fund GIC says it pared UBS stake at a loss” (Channel NewsAsia, May 16) – “GIC declined to comment on whether it still owned a slice of Citigroup, although Reuters data showed GIC was not listed as among the top 50 Citi shareholders on Monday”.

“The fund measures its performance on an overall portfolio basis, based on long term rather than annual returns. GIC also noted on Tuesday that its portfolio averaged 4 per year per year real returns over the 20-year period from 1996 to 2016. This period included the Global Financial Crisis and the UBS and Citigroup investments.

UBS, the world’s biggest wealth manager, said on Monday that GIC intended to place up to 93 million existing shares in UBS through a sale to institutional investors.

Shares of the Swiss bank closed 1.3 per cent lower at 16.61 Swiss francs after the news, which unusually came during trading hours.

At the closing price, 93 million shares would be worth 1.54 billion Swiss francs (US$1.55 billion).

GIC was one of the first sovereign funds to pump billions into Western banks, which were rocked by the financial crisis and suffered deep losses.

Singapore took a 9 per cent stake in UBS in 2007 via an emergency capital injection when UBS unveiled US$10 billion worth of subprime write downs, Reuters reported. UBS said at that time that GIC would invest 11 billion francs.

The sovereign fund converted its 11 billion franc investment in UBS notes into shares in 2010.”

Leong Sze Hian

About the Author

Leong
Leong Sze Hian has served as president of 4 professional bodies, honorary consul of 2 countries, an alumnus of Harvard University, authored 4 books, quoted over 1500 times in the media , has been a radio talkshow host, a newspaper daily columnist, Wharton Fellow, SEACeM Fellow, columnist for theonlinecitizen and Malaysiakini, executive producer of Ilo Ilo (40 international awards), invited to speak more than 200 times in over 30 countries, CIFA advisory board member, founding advisor to the Financial Planning Associations of Indonesia and Brunei. He has 3 Masters, 2 Bachelors degrees and 13 professional  qualifications.