UBS subprime losses deepen, bank deep into red
Subprime-related problems at UBS AG deepened on Wednesday as the Swiss bank unveiled $4 billion in new write downs in a surprise statement, dragging the embattled bank deep into the red for the year.
By Agencies |
ZURICH: Subprime-related problems at UBS AG deepened on Wednesday as the Swiss bank unveiled $4 billion in new write downs in a surprise statement, dragging the embattled bank deep into the red for the year. UBS posted a 12.5 billion Swiss franc ($11.45 billion) loss for the last three months of 2007 and a full-year loss of 4.4 billion francs.
The bank had previously left open the possibility of a full-year loss, depending on its performance in the final quarter. UBS is one of the hardest-hit banks worldwide from the credit crisis that has caused over $100 billion in losses, gashed balance sheets and forced some of the proudest institutions like UBS, Citigroup and Merrill Lynch into emergency capital-raising measures.
The surprise announcement adds to the sense of chaos in Western banking after Societe Generale last week shocked with a $7 billion loss it blamed on a lone trader -- the worst trading loss in history by far. The new writedowns bring the total writedowns from the sub-prime debacle to $18.4 billion at UBS and will likely increase pressure on chairman Marcel Ospel, who presided at the group during its push into risky U.S. investments, to resign. UBS shares were seen sharply lower in pre-market indications.
"This is certainly not good," said analyst Georg Kanders at bank WestLB. "I had expected less." The group last month announced a 13 billion Swiss franc capital injection from Singapore and an unidentified Middle East investor and hopes to convince shareholders to approve the plan at an extraordinary meeting on Feb. 27. UBS is now struggling to restructure its investment bank and repair its credibility after the staggering losses, which have pushed its shares 40 percent lower over the past year.
UBS said in a statement the results reflect $12 billion in losses from the U.S. subprime market, plus $2 billion in losses from other U.S. residential mortgages and that weak trading income dragged performance lower as well. UBS was scheduled to report results on Feb. 14.
The group said it managed to reduced its balance sheet and risk weighted assets during the quarter, which resulted in a loss, and that it will report a BIS Tier 1 ratio -- a measure of capital safety -- of 8.8 percent as of Dec. 31. The Swiss bank's huge losses, which have prompted calls for it to spin off its investment banking business and concentrate on its highly successful wealth management activities, stem from a disastrous hedge fund venture into subprime mortgages.
The bank had previously left open the possibility of a full-year loss, depending on its performance in the final quarter. UBS is one of the hardest-hit banks worldwide from the credit crisis that has caused over $100 billion in losses, gashed balance sheets and forced some of the proudest institutions like UBS, Citigroup and Merrill Lynch into emergency capital-raising measures.
The surprise announcement adds to the sense of chaos in Western banking after Societe Generale last week shocked with a $7 billion loss it blamed on a lone trader -- the worst trading loss in history by far. The new writedowns bring the total writedowns from the sub-prime debacle to $18.4 billion at UBS and will likely increase pressure on chairman Marcel Ospel, who presided at the group during its push into risky U.S. investments, to resign. UBS shares were seen sharply lower in pre-market indications.
"This is certainly not good," said analyst Georg Kanders at bank WestLB. "I had expected less." The group last month announced a 13 billion Swiss franc capital injection from Singapore and an unidentified Middle East investor and hopes to convince shareholders to approve the plan at an extraordinary meeting on Feb. 27. UBS is now struggling to restructure its investment bank and repair its credibility after the staggering losses, which have pushed its shares 40 percent lower over the past year.
UBS said in a statement the results reflect $12 billion in losses from the U.S. subprime market, plus $2 billion in losses from other U.S. residential mortgages and that weak trading income dragged performance lower as well. UBS was scheduled to report results on Feb. 14.
The group said it managed to reduced its balance sheet and risk weighted assets during the quarter, which resulted in a loss, and that it will report a BIS Tier 1 ratio -- a measure of capital safety -- of 8.8 percent as of Dec. 31. The Swiss bank's huge losses, which have prompted calls for it to spin off its investment banking business and concentrate on its highly successful wealth management activities, stem from a disastrous hedge fund venture into subprime mortgages.
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