UBS, one of the biggest casualties of the US subprime crisis, on Wednesday morning revealed a further $12bn in write downs on its portfolio of troubled mortgage-related securities, and a Q4 net loss of 12.5bn Swiss francs ($11.4bn), which will result in a full-year loss of about CHF4.4bn, the Zurich-based bank said in a statement on Wednesday.
The surprise announcement by UBS, coming ahead of the Swiss bank’s annual results on February 14 and contained in an emailed statement, means UBS will report a net group loss of about SFr4.4bn ($4bn) for 2007 when its full figures are released February 14, notes the FT.
Bloomberg, meanwhile, reports that the Swiss investment bank’s Q4 loss was almost double the estimates of analysts surveyed by Bloomberg. The Q4 loss was bigger than the record declines reported earlier this month by Citigroup and Merrill Lynch. The collapse of the US subprime mortgage market has led to more than $130bn of losses and markdowns at securities firms and banks since June, notes Bloomberg.
According to the FT, UBS said the full year loss, which it had signalled when disclosing initial Q4 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, shocked 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, the FT reports.
UBS’s terse announcement this morning 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 Singapore and Saudi Arabia, the bank said its BIS Tier I capital ratio 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.
