Crisis inflicts fresh wounds, UBS cut deepest

By Mike Peacock

LONDON (Reuters) - Fresh writeoffs at big European and Japanese banks on Wednesday threw the investor spotlight firmly back onto the credit crunch after days gazing at Societe Generale's stunning losses, which it blames on a junior trader.

With the Federal Reserve expected to cut interest rates for the second week running, Swiss bank UBS (UBSN.VX: Quote, Profile, Research) illuminated the depth of the crisis -- unveiling $4 billion in new writedowns tied to the U.S. subprime mortgage meltdown, dragging it deep into the red for the year.

UBS has now written off a total of $18.4 billion on the back of a credit crisis that has caused over $100 billion in losses worldwide and forced UBS and others, such as Citigroup (C.N: Quote, Profile, Research) and Merrill Lynch (MER.N: Quote, Profile, Research), to seek emergency capital from abroad.

The Swiss bank posted a 12.5 billion Swiss franc ($11.45 billion) loss for the last three months of 2007 and a full-year loss of 4.4 billion francs.

Newspaper reports said subprime losses at Japan's Mizuho Financial Group Inc (8411.T: Quote, Profile, Research) may have ballooned to as much as $2.8 billion, potentially forcing the bank to cut its full-year forecast for a second time.

Japan's 2nd-largest bank, which reports results on Thursday, may have to inject 200 billion yen ($1.9 billion) or more into its faltering brokerage unit, the Nikkei business daily said.

"2007 (was) a horrible year for the banks and the sector is not out of the woods yet," said Franz Wenzel, strategist at AXA Investment Managers in Paris. "Most of the banks will try to put all the write-downs in their 2007 results as they want to clean the balance sheet going forward."

Munich Re (MUVGn.DE: Quote, Profile, Research), the world's second-biggest reinsurer, bucked the trend, posting record earnings for 2007 and booking fourth quarter losses of less then 10 million euros on investments exposed to the subprime market.