As the Swiss government balks at a much-murmured merger with Credit Suisse Group and with the liabilities produced by a recent public bailout acting as the ultimate poison pill, the way forward for stalled Swiss bank UBS may be more of the same.

While some analysts believe the two share sales that raised a total $28 billion coupled with a Sfr60 billion ($49 billion) October rescue package from the Swiss government will be enough to keep the bank on track, investors have pushed UBS shares down by more than 50% since the start of October.

A quick fire sale or government-backed merger with another local champion, once a rumored prospect, now seems unlikely. The scandal-scarred bank -- an occasional target of activist investors that is both the world's leading wealth manager, with Sfr2.64 trillion under management, and one of the world's biggest victims of the subprime mortgage debacle -- has no choice but to soldier on.

"The lower the shares sink, the more an option of a fire sale appears realistic at first glance. But any buyer would have to take on the entire government bailout -- this means the [$60 billion] in illiquid assets now at the [Swiss] National Bank. This is in the contract," said Daniel Zuberbühler, head of the Swiss Federal Banking Commission, in a recent Sonntagszeitung interview.

In October, the Swiss government agreed to relieve UBS of up to $60 billion in toxic assets and inject Sfr6 billion in exchange for an eventual 9.3% stake. UBS may eventually choose to buy back $54 billion in bad investments, but not any time soon.

Despite the government support, Zuberbühler ruled out a forced union with Credit Suisse. "That would be a consolidation of investment banking problems. It wouldn't be good. And we also don't want that kind of monstrosity in this small country."

After writing off nearly Sfr50 billion in bad investments, UBS is getting hammered by clients unsettled not only by its missteps in the credit markets, but by the indictment of a board member over money-laundering charges and what are widely seen as exorbitant bonuses for managers.

This all comes after activist investors took one last run at the bank, hoping to finally win over shareholders and force the board to break up the bank into its wealth management and investment banking divisions -- as critics had been demanding. Former UBS president Luqman Arnold, through his London-domiciled Olivant Ltd. vehicle, picked up just under 3% of the bank and began using the power of the press release to call for changes. But that came to an abrupt halt when Lehman Brothers Holdings Inc. went bankrupt in September. Lehman had been holding on to the shares, which are now likely to be used to repay Lehman creditors.

Although CFO John Cryan recently said UBS has seen positive developments in money outflows, its third-quarter figures don't support his confidence. In three months the bank suffered net withdrawals of Sfr83.6 billion in client funds, bringing the nine-month total to Sfr140 billion.

That compares with inflows of Sfr125 billion in that period in 2007.

Client confidence was further eroded in November, when a United States Attorney indicted UBS management board member Raoul Weil.

As the head of global wealth management and business banking at UBS, Weil allegedly used "encrypted laptops, numbered accounts and other counter-surveillance techniques" to help clients hide funds from the Internal Revenue Service. According to the indictment, the cross-border business of UBS generated about $200 million a year in revenue by helping a reported 20,000 wealthy Americans hide $20 billion from the IRS.

In response, UBS said it will no longer allow foreign units to deal with the portfolios of American customers. Weil has resigned.

Back at home, the bank appears unable to explain why it approved Sfr10 billion in bonuses for 2007, some to executives who were later let go. Although former CEO Peter Wuffli, who left the bank in summer 2007, has returned Sfr12 million in bonuses, former chairman Marcel Ospel has yet to say whether he will give back any of his compensation. The bank has eliminated bonuses for top brass this year, and since the Swiss Federal Banking Commission has to approve other reward payments, it's unlikely the bonus payments will even make it into the double-digit billions this year.

"Looking back, you have to say that we should have reduced the bonuses by a lot more," Zuberbühler said in the Sonntagszeitung.

At this point, looking back may be easier for UBS than looking forward.