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Mon, Feb 09, 2009 - Page 10 News List

UBS expected to post biggest Swiss loss ever


Switzerland’s largest bank, UBS, is expected to announce the biggest loss in the country’s history tomorrow when it releases its results for last year, a year that saw the national icon tarnished by the subprime crisis.

But if there is a silver lining for the bank, which has been the target of a huge state rescue package, it lies in the fact that analysts say UBS has now hit bottom after its stock price fell 82 percent since the summer of 2007.

For that reason, the loss of nearly 20 billion Swiss francs (US$17.2 billion) the bank is expected to announce for last year should not surprise markets, analysts said.

“The bank has already publicized its problems to a large degree and the fall in the stock price should not be so large,” a trader in Zurich said.

In November, UBS posted a net profit of SF296 million for the third quarter following a year of losses, but warned that a renewed loss was looming for the following quarter.

The numbers expected to be unveiled tomorrow are staggering, reflecting the fact that UBS was one of the banks hardest hit by the US subprime loan crisis.

Its annual net loss is believed to be between SF14.1 billion and SF19.4 billion, estimates from Swiss financial news agency AWP said.

The loss for the fourth quarter alone is expected to be between SF5.9 billion and SF7.5 billion for the bank, which has already written down about US$46.9 billion in assets.

“The fourth quarter was clearly difficult for UBS,” a Deutsche Bank commentary said, adding however that removing “toxic” non-liquid assets with help from the Swiss central bank along with restructuring efforts meant “UBS has passed the worst.”

Customer confidence in the bank has in turn taken a hit, posing a major problem for UBS, which has hemorrhaged capital as a result.

Under a rescue plan unveiled in October, the Swiss government injected SF6 billion in new capital into UBS and lent US$54 billion to the bank to transfer its non-liquid assets into a separate fund.

The massive spread of so-called “toxic” assets — mainly linked to financial instruments now worth very little because of the US home-loan crisis — throughout the global banking system is at the core of the crisis since it broke in August 2007.

The bank also said last month that it would slash more jobs from its trading unit, adding to 9,000 job reductions already announced over the past year.

With its reputation tarnished, the damage only became worse when UBS went ahead with bonus payments, sparking accusations that it was misusing the rescue money.

Swiss media have reported that the payments total SF2 billion instead of the initially planned SF3 billion.

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