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Switzerland sold its stake in its largest bank, UBS , at the top end of its price range, a source said on Thursday, making a profit from last year's rescue deal.

The sale of the 9 per cent stake comes a day after Switzerland agreed to reveal the names of thousands of UBS's rich American clients to Washington, settling a tax-avoidance dispute that dented its prized banking secrecy. The U.S. warned it was now setting its sights on other institutions and individuals involved in hiding assets from the taxman.

Swiss authorities said the sale showed UBS had found a solid footing again after becoming one of the biggest victims in the credit crisis, and the markets reacted positively by pushing up its shares.

"The sale ... has been long awaited and a removal of the overhang will be positive for sentiment, combined with the U.S. tax settlement announced yesterday," said Fiona Swaffield, a bank analyst at Execution Ltd.

The Swiss sold 332 million shares at 16.50 Swiss francs each, the source with direct knowledge of the deal said, at the top end of a 16 to 16.50 francs price range, with books being three to five times oversubscribed.

That means the government would take in 5.5-billion Swiss francs ($5.1-billion U.S.), plus 1.8-billion francs to compensate for lost interest on the mandatory convertible notes, making a profit on the 6-billion francs it paid in October as part of a set of emergency measures.

Bankers were now allotting the shares, market sources said, and final results were expected by 1200 GMT. A spokesman for the Swiss Finance Ministry said details would be announced later on Thursday.

The sale is being run by Credit Suisse, Morgan Stanley and UBS itself, traders said.

The Swiss National Bank said the government sale indicated the market was more confident in UBS, while Switzerland's financial regulator FINMA said it supported the sale since the bank now had a "stable, sound capital base".

UBS shares were up 3.7 per cent at 17.36 francs at 0933 GMT, having closed at 16.74 francs on Wednesday, while the DJ Stoxx bank sector index was up 2.04 per cent.

Switzerland, like most other Western countries took over part of its banking industry after the credit crisis threatened a systemic collapse, but the sale now means it is ahead of some others in finding an exit.

The UK and the U.S. still hold big stakes in major banks, while is still the largest shareholder in Nordea after it stepped in to rescue lenders from a crisis in the early 1990s.

Switzerland announced the divestment late on Wednesday, saying a capital raising in June and the settling of a tax dispute with Washington had increased confidence in the bank .

Other Swiss banks, such as Credit Suisse, Julius Baer, Zuercher Kantonalbank (ZKB) and Union Bancaire Privee (UBP), are now fretting that the U.S. taxman's spotlight could fall on them, the Wall Street Journal reported.

"This announcement today should send a signal, no matter what institution you're with, the IRS is willing to pursue both the institution and the individual," Internal Revenue Service commissioner Doug Shulman said on Wednesday.

In February, UBS agreed to pay $780-million and disclose about 250 client names to settle a criminal probe by U.S. authorities. One former UBS banker testified that he smuggled a client's diamonds in a tube of toothpaste.

The country claims its banking secrecy remains intact, but some private bankers say it is no longer a selling point for its banks, which will need to offer other skills like legacy planning to attract clients.

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