Ubs Feels Bigger Subprime Sting

The Age

Thursday January 31, 2008

By Vanessa Burrow, with Reuters

EUROPEAN bank UBS has stunned the market, admitting it has lost $US14 billion ($A15.8 billion) on US mortgage-related investments.

The bank said last month it had written down similar assets by $US10 billion, but last night that figure grew by $US4 billion.

The bank's fourth-quarter loss of 12.5 billion Swiss francs ($A12.9 billion) was bigger than any posted by Citigroup and Merrill Lynch, the US banks that were hardest hit by the so-called subprime mortgage crisis.

Both banks reported fourth-quarter losses of almost $US10 billion, cut the value of book assets by billions more, and were forced to turn to international investors for capital.

Similarly, the Government of Singapore Investment Corporation and a mystery Middle Eastern investor have already taken a stake in UBS worth 13 billion Swiss francs.

In a statement before its official reporting date of February 14, UBS said it expected to report a total loss of about 4.4 billion Swiss francs for last year.

UBS shares fell 4.1% in early trading, but were down only 1.4% late last night. They have lost 40.7% in the past year.

"Two thousand and seven has been a horrible year for the banks and the sector is not out of the woods yet," said Franz Wenzel, a strategist at AXA Investment Managers in Paris.

Last week it was revealed that a rogue trader had defrauded French bank Societe Generale of EUR4.9 billion ($A8.2 billion). In contrast, French bank BNP Paribas last night reported an estimated gross operating income of EUR2.2 billion for the fourth quarter, up 11%, and estimated net income of EUR1 billion, up 7%. -- With REUTERS

© 2008 The Age

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