Mortgage woe hits Swiss bank UBS
Banking giant UBS today plunged to an annual loss of 4.38 billion Swiss francs (€2.7bn) after huge write-downs linked to the US sub-prime mortgage crisis.
UBS said 2007 was “one of the most difficult in its history” as it wrote off $13.7bn (€9.4bn) on bad bets in the US mortgage market in the last quarter.
The bank warned of tough times ahead as it posted a fourth-quarter net loss of 12.45 billion Swiss francs (€7.7bn).
Chief executive Marcel Rohner said: “While most of our businesses continued to be very profitable, the sudden and serious deterioration in the US housing market, in combination with our large exposure in sub-prime mortgage-related securities and derivatives, has driven us into loss for the year.”
The bank added: “UBS expects 2008 to be another difficult year.”
Switzerland’s largest bank said the sub-prime losses pushed it into the red for the full year, the first annual net loss since 1997 when the bank was created from a merger of two major Swiss lenders.
The fourth-quarter result, in line with the bank’s forecast at the end of January, compared with a net profit of 3.4 billion Swiss francs (€2.1bn) in the same period of 2006.
The net loss for the full year compared with a profit of 12.2 billion Swiss francs (€7.5bn) in 2006.
The losses have forced UBS to seek 13 billion Swiss francs (€8bn) in fresh capital from Singapore’s government fund and an unnamed Middle East investor.
Numerous executives have left following the losses, including chief executive Peter Wuffli, investment banking head Huw Jenkins and financial chief Clive Standish.
Banks have felt the pain from losses on complex financial instruments based on US mortgages as spiralling default levels – caused by high interest rates in the US – triggered a crisis of confidence across the financial system last summer.
In the UK, Bradford & Bingley this week said it has written off £144.1m (€194m) due to investments hit by the credit crunch and more losses are feared from Britain’s major banks as the banking reporting season nears.
