Shares in UBS were expected to open down more than 1 percent on Thursday after the Swiss government said it would sell its 9 percent stake in the bank.
The stake is expected to be placed at between 16 and 16.50 Swiss francs per share, lower than Wednesday's closing price of 16.74, traders said.
The Swiss government said late on Wednesday it would sell the stake, saying a capital raising in June and the settling of a tax dispute with the United States had increased confidence in the bank.
The news came just hours after Switzerland agreed to reveal details of about 4,450 wealthy American clients of UBS to U.S. authorities in a tax dispute settlement that pierces Swiss banking secrecy and now threatens to spill over to other banks.
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.
The government had originally invested 6 billion francs ($5.6 billion) in October in return for the UBS stake in mandatory convertible notes. It always said it wanted to exit that stake as soon as possible, but only once it was sure of the bank's stability.
The Swiss National Bank said the government sale indicated the market was more confident in UBS. Switzerland's financial regulator FINMA said it supported the government decision since the bank now has a stable, sound capital base.
(Reporting by Rupert Pretterklieber and Sam Cage)
($1=1.076 Swiss Franc)