Swiss banking giant UBS AG estimated that it would take a first quarter loss of 12 billion Swiss francs due to continued subprime losses, that it would raise CHF 15 billion, and that its chairman would go.

The firm pre-announced an estimated net loss of approximately CHF 12 billion for the first quarter, after taking CHF 19 billion in losses and writedowns on US real estate and structured credit positions. In the first quarter, UBS substantially reduced its real estate related positions through both valuation adjustments and significant disposals, it said.

It also announced a fully underwritten rights issue of approximately CHF 15 billion to strengthen Tier 1 capital. The proposed capital increase is being fully underwritten by a syndicate of banks, led by J.P. Morgan, Morgan Stanley, BNP Paribas and Goldman Sachs.

And it plans strategic moves, including the creation of separate unit to manage selected US real estate related positions, and that chairman, Marcel Ospel, will not seek re-election. He will be succeeded by the firm’s general counsel, Peter Kurer, as the chairman candidate.

UBS said it is confident that these measures will deal effectively with the firm’s real estate exposures and allow the bank to focus on strengthening its core operations.

Commenting on these moves, Marcel Rohner, CEO of UBS said, “We believe this capital increase and the creation of a vehicle to separate problem assets from the remainder of our businesses will allow us to return to sustainable value creation over time. These measures enable UBS to remain strongly capitalized and focused on client needs.”

“During the quarter, profits from most of the businesses remained acceptable in challenging conditions. We have made further prompt writedowns and sales of our impaired US real estate-related positions. We have reduced risk weighted assets and implemented measures to control costs and strengthen the structure of the firm,” he added. “However, the environment remains difficult, and while we are committed to further substantially reducing our exposures we do not want to undertake sales of positions at severely distressed levels. With these measures we have created the basis to weather one of the most difficult periods in the history of the industry.”

Following today’s announcement, Fitch Ratings has downgraded the long-term issuer default ratings of UBS. The outlooks remain negative on earnings fears.

“The scale of the Q108 net loss, together with still difficult market conditions, makes it a real possibility that the group may not report a full-year profit for the second consecutive year,” Fitch says.

The ratings agency notes that following these latest writedowns UBS’ residual exposure to the U.S. subprime sector will be around US$15 billion, with a further residual US$16 billion to the Alt-A sector, compared to combined exposures of around US$73 billion in September 2007.

To compensate for the additional write-downs, UBS has arranged for a rights issue of approximately CHF15 billion. “Assuming successful completion of the rights issue, UBS’s Tier 1 capital ratio is expected to be around 10.6%, a ratio that remains strong relative to its peers,” Fitch says.

“The negative outlooks reflects continued uncertainty over future earnings, together with the challenges faced by a new management team in reshaping the group’s investment bank in still difficult operating conditions,” the rating agency notes.

“While the additional write-downs reduce downside risk from the group’s U.S. real estate related positions, the residual exposures still represent a very high proportion of equity, even after adjusting for the expected capital increase. Of additional concern is the potential damage that may have been done to UBS’s core private, wealth and asset management franchises as a result of negative publicity surrounding its U.S. real estate exposures,” Fithch adds.