Battered bank UBS cut its dividend by a third, based on current stock prices, as it moved to a stock dividend from cash to shore up its equity base.
The Swiss bank said on Wednesday it would offer shareholders one new share for every 20 shares they own.
UBS has replaced its cash payout with stock in an emergency move to raise new equity capital and save cash, after about $37 billion in subprime writedowns forced the Swiss bank to report deep losses.
The stock dividend represents a cash equivalent of roughly 1.69 Swiss francs per share, based on the bank's closing share price of April 15, which is about 32 percent below the total 2.50 francs per share paid out in 2006.
If the shares rise between now and May 15, when an automatic exchange of entitlements for shares takes place, the value of the stock dividend will rise.
The bank is also struggling to repair its reputation after taking heavy hits from the subprime crisis.
"We shouldn't fool ourselves," the bank's chairman-designate Peter Kurer told the Financial Times in an interview on Wednesday.
"We can't pretend that there has been no reputational damage. Experience says it goes away after two or three years."
UBS shares rose by 1.1 percent to 34.06 francs, in line with the broader index of European banks.
UBS is seeking to raise around 39 billion Swiss francs ($39 billion) in new capital and has said up to now that it would try to keep the value of the stock dividend roughly on par with the 2006 cash dividend.
But UBS shares have fallen about 36 percent since the start of 2008 as its writedown problems mounted, making it increasingly difficult for the bank to offer enough stock to match previous cash dividends.
The dividend entitlements will be traded on the SWX exchange starting April 28 and through to May 9, UBS said.
Entitlements held after that will be automatically exchanged into shares.
Analysts played down the importance of the dividend cut, saying the less new stock UBS issued through the dividend, the less it would dilute the holdings of existing shareholders.
"It's less than last year, but given the situation, a higher stock dividend would mean higher dilution," said analyst Madeleine Hofmann at bank Julius Baer.
"Whether 2.50 or 1.60 or even 1 franc, I don't care. That's not the problem," said analyst Javier Lodeiro at bank Sal. Oppenheim. "It's not a profit-and-loss story. It's a balance-sheet story. The dividend amount is not as important as the number of new shares they are issuing."