Investment bank fears credit crisis could deepen
Investment bank UBS today warned of further write-downs amid the fall-out from the US sub-prime mortgage crisis as it posted its first quarterly loss in nine years.
The Swiss bank said markets “remained uncertain” and cautioned there may not be a speedy resolution to the collapse of America’s high risk home loan market and subsequent tightening in credit markets.
UBS posted operating losses of 726 million Swiss francs (€432m) in the three months to the end of September, with its exposure to crisis-hit US home loans leading to losses and write-downs of 5.3bn Swiss francs (€3.1bn).
UBS is expecting its investment banking business to remain in the red until the end of the year, although it hopes the wider group will return to profitability in the fourth quarter.
The group’s losses follow last week’s news from US investment bank Merrill Lynch that the firm saw a $2.24bn (€1.55bn) net loss in the third quarter – its first loss in six years.
Merrill was forced to write down $7.9bn (€5.48bn) due to its exposure to bad mortgage related debt, leading to speculation that the bank’s boss Stan O’Neal is on the brink of stepping down.
At UBS, chief executive Marcel Rohner has overhauled the management team, taking personal responsibility for the investment banking division as chairman and chief executive.
He is cutting costs in the division, with around 1,500 jobs due to be culled by the end of the year.
The group said today it was taking a number of steps to “address the weaknesses that led to the losses”.
Management, the group’s structure and risk management are all being put under the microscope as part of the review.
