WRAPUP 2-Swiss banks get emergency funds to fight crisis

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By Sam Cage and Sven Egenter

ZURICH, Oct 16 (Reuters) - Switzerland's two largest banks will receive billions of francs of emergency funding from the country's government and other investors to shore them up against the financial crisis, they said on Thursday.

Credit Suisse Group AG, the country's second-largest bank, also announced a net loss of about 1.3 billion Swiss francs ($1.2 billion) for the third quarter after making 2.4 billion francs in fresh writedowns.

The Swiss government will give UBS AG, the largest Swiss bank, a capital injection of 6 billion Swiss francs in the form of mandatory convertible notes, while Credit Suisse Group AG will raise funds from investors including the Qatar Investment Authority.

UBS also reached an agreement with the Swiss National Bank to transfer up $60 billion of illiquid securities and other assets from its balance sheet to a separate fund entity.

"With this transaction, UBS caps future potential losses from these assets, secures their long-term funding, reduces its risk-weighted assets and materially de-risks and reduces its balance sheet," UBS said in a statement.

UBS (UBSN.VX: Quote, Profile, Research, Stock Buzz) has already been forced to make a total of $42 billion of writedowns on toxic assets due to the credit crisis, more than any other European bank, and is slashing thousands of jobs, but it has also already raised $30 billion of fresh capital.

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It has launched a restructuring designed to help it turn the corner, involving the separation of its wealth management from its investment banking arm, and has said it expects to report a small profit when it reports third quarter results on Nov. 4.

But it has denied plans to sell off the investment banking arm saying the combination of an investment bank with wealth management remains the right model.

Credit Suisse said it had increased its Tier 1 capital by about 10 billion francs from several major investors, including a subsidiary of the Qatar Investment Authority.

It said it had raised the funds through the issue of treasury shares, new shares through mandatory convertible bonds and by issuing non-dilutive hybrid tier 1 capital.

It also said it expected a net loss of around 1.3 billion francs in the third quarter, including a pretax loss of around 3.2 billion francs from investment banking, after writedowns of approximately 2.4 billion on leveraged finance and structured products businesses and due to "exceptionally adverse trading conditions" in September.

However it said it was very strongly capitalized and the latest measures meant it immediately exceeded revised regulatory requirements.  Continued...