Credit Suisse has upgraded its Swiss rival, UBS, from neutral to outperform in the belief that the risks to the UBS franchise are starting to ease, and that once the bank’s legal wranglings with the US authorities over alleged tax evasion are over UBS will be able to rebuild its sales process in private banking.

Credit Suisse said that the investment bank offers an attractive risk/reward ratio at current valuations – with the investment banking outlook appearing to be stabilising – and that there is little evidence of UBS losing market share in key capital markets.

Last Thursday, UBS said it expects to report a loss for its second quarter in 2009, with the bulk of the loss stemming from restructuring and other charges that have already been announced.

The Zurich-listed firm did not go into figures ahead of its results statement due on 4 August. It said: “The operating result for the quarter is expected to represent an improvement compared with the first quarter of 2009, largely attributable to better market conditions affecting the investment bank and a reduction in losses and write-downs on legacy risk positions.”

“Net new money has been negative in the three wealth and asset management divisions in the quarter to date,” the statement continued.

As a result of a cut in risk-weighted assets, UBS said its Tier 1 capital ratio - a key measure of a bank’s capital strength - is expected to be higher at 30 June 2009 than at 31 March 2009.

In a separate statement on Friday UBS said it expected to raise about SFr3.8 billion ($3.5 billion) in new capital from the offer of 293,258,050 newly issued shares.

Last autumn, UBS received a SFr6 billion injection from the Swiss government to bolster its capital. The Swiss government has welcomed the new capital increase.

UBS has logged up to $50 billion in credit-related write-downs stemming from the financial crisis as well as getting involved in a bruising legal row with US tax authorities about allegedly helping wealthy US citizens evade taxes.