Posted on 01/29/2008 11:41:08 PM PST by TigerLikesRooster
UBS hit by further $4bn write-down
By Haig Simonian in Zurich
Published: January 30 2008 07:21 | Last updated: January 30 2008 07:21
UBS, one of the biggest casualties of the US subprime crisis, on Wednesday revealed a further $4bn in write downs on its portfolio of troubled mortgage-related securities.
The surprise announcement, coming ahead of the Swiss bank’s annual results on February 14, means UBS will report a net group loss of about SFr4.4bn ($4bn) for 2007.
UBS said the full-year loss, which it had signalled when disclosing initial fourth-quarter subprime writedowns of $10bn last month, stemmed from additional losses on its portfolios in recent weeks, and a very weak trading period in the fixed income, currencies and commodities division of its investment bank.
The latest writedowns take to $18bn the total UBS has lost in 2007 on its large holdings in US mortgage-related securities, including $4bn of writedowns reported in the third quarter.
The bank, once renowned for its caution and rigorous controls, surprised investors last year after it emerged that it held more than $40bn in subprime-related paper through positions taken by Dillon Read Capital Management, its now-closed internal hedge fund, and its conventional fixed income trading activities.
UBS’s terse announcement gave no details of its remaining book, and said further information would come out at its results presentation next month.
The bank said only that it had suffered $12bn in writedowns in the fourth quarter on subprime paper, and $2bn on “other positions related to the US residential mortgage market.”
To rally support for its plans to raise SFr13bn by selling shares to Singaporean and Saudi Arabian investors, the bank said its BIS Tier I capital ratio – a key measure of its financial strength – amounted to 8.8 per cent at the end of December. That figure reflected its full losses and efforts to reduce risk, as well as capital raising plans such as a mandatory scrip dividend and the sale of treasury shares.
However, the 8.8 per cent, which is well below the 11-12 per cent ratio the bank has as its goal, did not include the additional financing from the sovereign wealth funds, explaining its concern to raise the extra capital.
Ping!
By the time Q4 2007 earnings are all published, the total will be past $200B. A couple of months ago many people who should know better were using that as the “could be as high as” teaser.
I’m sticking to my conditional estimate: I won’t even estimate a final total until we see published losses of $400B.
Keating Five. Bailout. Coming up...
Market should be pretty interesting today, sports fans.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.