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Selection below. Emphasis ours.

Merrill Lynch gets points for flamboyancy:

This morning UBS announced the big kahuna of legacy write-downs - CHF 18 billion and a CHF 15 billion capital raising. The write-downs compare with our forecast of CHF 11 billion in Q1 and CHF 21 billion of total necessary writedowns. So we can’t say with certainty that this will be the last write-down, but we are fairly certain that after taking CHF 4 billion in Q3, CHF 14 billion in Q4 and now CHF 18 billion in Q1 UBS has broken the back on its legacy writedowns. A CHF 15 billion capital raising is in-line with our expectation.

The Q1 loss is approximately CHF 12 billion. That includes the CHF 18 billion write-down partly offset by CHF 2 billion of fair value accounting gain on your own debt and CHF 3.8 billion of fair value accounting for the option embedded in the mandatory convertible - or, said another way - the money GIC lost when it bought the UBS mandatory convertible. That last part was unexpected by us, and still seems a bit odd.

Q1 pre-tax profits in the Wealth Management & Business Banking business were CHF 2.1 billion versus our forecast of CHF 2.2 billion and profits in asset management were CHF 300 million versus our forecast of CHF 400 million. Net new money in Wealth Management was positive and net new money in private banking is negative - that isn’t much detail, but both are inline with our forecast.

After everything UBS expects to have a Tier 1 ratio of 10.6% - which still isn’t that strong, but if the write-downs are over the Tier 1 ratio should rebuild quickly. We think the market will take this well - and wouldn’t be surprised to see the shares finish the day as an outperformer.

KBW is unimpressed: “Little surprise, little positive”

Bear (1): Capital raising at least 19% dilutive. We estimate the issuance of CHF15bn new shares to be ~19% dilutive with a zero discount (marginally more if at a discount, given the adjustment to the mandatory convertible). The rights issue is fully underwritten at ~CHF12 per share (meaning if no buyers can be found at higher levels, the underwriters will acquire at CHF12 per share). Pro forma for the capital raising, the group would have a 10.6% tier 1 ratio.
Bear (2): Ominous inflow commentary. That the WM&BBS division only “expects” to achieve positive inflows (without quantifying them) does not help diminish fears that the core WM franchise has been impaired by reputational problems elsewhere.
Bear (3): Mortgage exposures. UBS reduced its exposure to subprime/Alt-A by ~$23bn during 1Q08, the vast majority of which seems due to ~CHF19bn of writedowns and losses (rather than true sales of assets). While undisclosed, we note that the marks UBS has taken will have come under scrutiny from the external underwriters in recent weeks, which may inspire some confidence in the level of the marks. However, with $31bn of risky mortgage assets remaining ($15bn subprime, $16bn Alt-A), UBS could yet be exposed to downside.
Neutral (1): Accounting gain. UBS’s 1Q08 net profit benefited from a CHF6bn positive accounting gain on revaluation of own debt and the mandatory convertible.
Bull (1): Ospel replaced. Chairman Marcel Ospel will not seek reelection at the pending AGM, to be replaced by Peter Kure, currently Group General Counsel and a member of the Group executive Board since 2002. Ospel’s replacement is likely to be positive for sentiment.