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UBS hit by lack of liquidity in 3Q

Switzerland's UBS recorded third quarter losses of 830 million Swiss francs (US$713 million) yesterday, blaming a lack of liquidity following the crisis in the US home loans market.

The losses at Switzerland's largest bank compared with a net profit of SF2.20 billion during the same period last year.

The results were in line with the Swiss bank's warning on Oct. 1 that it was expecting pre-tax operating losses of as much as SF800 million.

The bank's net profit over the first nine months of this year fell 8 percent to SF8.07 billion, it said in a statement.

The Swiss banking giant said it was on course for a renewed quarterly profit in the fourth quarter.

However, it cautioned that it was "unlikely" its investment banking division would make a positive contribution to its overall results in the last three months of the year, despite a good start to the period in all businesses.

UBS said the deterioration in the US subprime mortgage market, especially in August, was "so severe and sudden that markets turned illiquid."

Trading income swung to a SF3.55 billion loss, compared to SF2.4 billion in revenues during the third quarter last year, as the bank's investment banking division was sapped by writedowns related to US mortgage trading.

The bank's fixed income and commodities trading, meanwhile, plunged to a negative outflow of SF4.2 billion.

"Our third quarter result was unquestionably disappointing," UBS chief executive Marcel Rohner said.

Rohner underlined recent management and structural changes made by the bank.

"We are also taking steps to strengthen our market risk management and control framework," he said.

UBS said it was expecting a return to profitability in the fourth quarter despite "market uncertainties."

It cautioned that fixed income trading in the US remained exposed to any further deterioration in the US housing and mortgage markets.

Ratings downgrades for mortgage-related securities could also have a negative impact, it said.
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