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Fri, Feb 15, 2008 - Page 10 News List

UBS posts record loss after US$13.7bn writedowns

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UBS AG posted the biggest ever loss by a bank in the fourth quarter after US$13.7 billion in writedowns on securities infected by US subprime mortgages.

Europe's largest bank by assets had a net loss of 12.5 billion Swiss francs (US$11.3 billion), compared with a profit of SF3.4 billion a year ago, the Zurich-based company said yesterday. UBS reported on Jan. 30 a preliminary loss of about 12.5 billion francs for the period, after increasing writedowns.

Chief executive officer Marcel Rohner, on a conference call with reporters, described the results as "unacceptable" and declined to predict whether the bank would return to profit in the current quarter. Rising US subprime mortgage defaults have led to more than US$145 billion in writedowns and loan losses at the world's biggest financial companies. The G7 estimates the markdowns may swell to US$400 billion, German Finance Minister Peer Steinbrueck said last Saturday.

"The rot is spreading to other residential areas," ABN Amro Holding NV analysts Kinner Lakhani and Omar Fall said in a note to clients last week.

The analysts recommended that investors "avoid" UBS shares and forecast as much as US$10.8 billion in further writedowns at the bank.

UBS shares have slumped 36 percent in Zurich trading in the past six months, making it the sixth-worst performer in the 60-member Bloomberg Europe Banks and Financial Services Index, which lost 23 percent.

UBS' writedowns included US$10.8 billion on subprime residential mortgages, US$2 billion on so-called Alt-A mortgages, which fall between subprime and prime, and US$871 million on credit protection purchased from monoline insurers. The bank recorded losses of about US$500 million on commercial real estate and about US$200 million on loans for leveraged buyouts.

The Swiss bank said yesterday that this year would be "another difficult year."

The wealth management and business banking division raised fourth-quarter profit 12 percent to SF2.5 billion, and asset management earnings increased 19 percent to SF476 million. The investment bank had a loss in the quarter of SF15.5 billion, compared with a profit of SF1.36 billion a year ago.

UBS said on Wednesday it had hired Jerker Johansson to head its investment bank, replacing Huw Jenkins, who left in October after debt writedowns.

The 51-year-old vice chairman for Europe at Morgan Stanley will join UBS on March 17 after 22 years at the second-biggest US securities firm.

Johansson "faces many problems at his new firm, including restoring morale, cutting the problem exposures and convincing staff and clients that the investment bank has a long-term future at UBS," Peter Thorne, a London-based analyst at Helvea, said in a note on Wednesday.

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