Swiss banks UBS AG (UBS) and Credit Suisse (CS) both came under pressure Monday, as outlook for the sector dimmed further in the wake of the collapse of Lehman Brother Inc. (LEH) and the sale of Merrill Lynch & Co. ( MER) to Bank of America Corp. (BAC).

The Swiss banks are much better capitalized than their U.S. peers, and have made more aggressive write-downs on their portfolios of risky assets, but they aren’t immune to a further deepening of the credit crisis.

UBS is particularly vulnerable, given that it is among the hardest hit banks worldwide from the crisis. A newspaper article Sunday, though unsourced, drew attention to the fact that the Swiss bank will probably be forced to make more billion-dollar write-downs in the second half, and could disclose their size as early as Oct. 2, when it’s holding an extraordinary general meeting to approve the nomination of new board members.

UBS declined to comment on the article, which suggested that write-downs could amount to $5 billion.

The Lehman Brothers collapse means that the Swiss bank suddenly has far fewer strategic options for its own investment bank, said Markus Granziol, a private investor and a former high-ranking UBS executive.

“What many investors had been hoping for after UBS’ recent shift in strategy – separating the investment bank, and possibly even finding a buyer eventually – has been completely discredited over the weekend,” Granziol, chairman of UBS’ investment bank until 2002, said.

Last month, UBS unveiled a major shift in strategy with plans to separate its unprofitable investment bank from its flagship private bank, which caters to wealthy individuals. At 0840 GMT, UBS shares were down CHF2, or 8.3%, at CHF21.56. The stock has shed 54% of its value so far this year. Credit Suisse was down CHF3.1, or 6% lower at CHF49.46, having fallen 27% year-to-date.

Fallout from the crisis in the U.S. is pressuring sentiment, but that gloom has its roots in reality, said Dirk Becker, banking analyst in Frankfurt at Landsbanki Kepler.

Among other factors, Becker doesn’t expect the banks to get back all of the $7 billion they contribute to a rescue fund set up by 10 global banks.

The Swiss banks are part of the consortium of 10 that plans to provide $70 billion to help offset a credit squeeze amid the anticipated collapse Lehman Brothers.

And more bad news could come, he added.

“Things don’t look good with AIG (AIG) and Washington Mutual (WM) either, and so this seems to be just getting bigger and bigger. The crisis will certainly be here to stay for several more months,” he added.

The Swiss central bank said it is keeping a close eye on financial markets and is prepared to keep liquidity at a high level.

“We are closely watching the development on financial markets,” Swiss National Bank spokesman Werner Abegg told Dow Jones Newswires. “We are prepared to flexibly and generously supply the Swiss money market with liquidity,” the spokesman said.

Source: CNN.com