UPDATE 1-UBS shares sink on Alt-A writedown talk

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ZURICH, March 6 (Reuters) - Shares in Swiss bank UBS AG (UBSN.VX: Quote, Profile, Research) fell on Thursday on speculation it had sold a huge portfolio of risky mortgages at a deep discount and planned to announce another massive writedown in the first quarter.

Analysts said they believed UBS had sold its Alt-A investments -- U.S. mortgages ranked between prime and subprime -- to U.S. bond manager Pimco (ALVG.DE: Quote, Profile, Research) for 70 cents to the dollar, taking a deep discount on a 26.6 billion Swiss franc ($25.7 billion) portfolio.

Analysts also see the ailing bank making further possible writedowns on a massive 400 billion franc portfolio of repurchase agreements as it rushes to cut its exposure to the capital markets in general and to risky assets in particular.

While the Alt-A sale would help free UBS of some of the uncertainty that has dogged its share price, it could come at a steep price and force additional losses. Any losses resulting from repricing its repo portfolio amid turbulent markets may, however, introduce new doubts about more losses lying in wait.

"UBS may choose to sell down its workout book of mortgages, taking larger upfront losses to reduce uncertainty on capital ratios," Morgan Stanley said in a note to clients.

UBS declined to comment.

UBS shares were down 3.3 percent at 0919 GMT at 31.18 francs, after touching a new five-year low of 30.88 francs, more than the 1.22 percent fall in the DJ Stoxx European bank index .

Analysts at J.P. Morgan said they now expected UBS to write down 18.5 billion francs in total assets in the first quarter, compared with J.P. Morgan's previous estimate for 15 billion in writedowns, as a result of the Alt-A sale.