UBS to write down $3.4 billion
ZURICH (Reuters) - UBS AG, the world's largest wealth manager, unveiled $3.4 billion in losses, swept out senior managers and slashed jobs in one of the biggest casualties yet from the worldwide credit crunch.
UBS said on Monday it would write down a net 4 billion Swiss francs ($3.42 billion) in its fixed-income portfolio and elsewhere, resulting in a third-quarter loss of 600 million to 800 million Swiss francs, its first quarterly loss in nine years.
UBS said it would shed 1,500 jobs in its investment bank -- or 7 percent of the division's 22,300 staff -- a sharp reversal of its recent build-up.
"It's probably safe to say, UBS won't be the last bank to announce something like this in the months ahead, but it begs the question as to how long this turmoil will continue," said Eamonn Hughes of Goodbody Stockbrokers.
The loss underscores the depth of the crisis -- in which central banks have injected record amounts of liquidity into the markets to keep the financial system functioning -- and highlights uncertainties at rival banks, which may also be forced to unveil losses ahead of scheduled results.
In a separate announcement, rival bank Credit Suisse said it was also hit by the credit crunch but that it would remain profitable in the third quarter with income from continuing operations after tax of around 1.3 billion francs. The bank declined to provide further detail.
UBS' fall from grace began earlier this year when heavy costs from its rapid U.S. expansion, a wave of key defections and then surprise losses at hedge fund Dillon Read Capital Management led to the shock departure of its chief executive, Peter Wuffli.
But Rohner's writedowns and management sweep may prove to be the inflection point for UBS, said analysts at Bear Stearns.
"This is clearly not good news and adds to the catalogue of bad news that UBS has disclosed in the last year or so. Similarly, the air of stability has gone as management changes have come thick and fast," Bear Stearns said.
UBS shares dipped but later rallied alongside Credit Suisse as investors breathed a sigh of relief that the bank had appeared to draw a line under the losses, revitalize reforms and provide some clarity about its exposure.
UBS was up 2.4 percent at 64.10 francs at 9:51 a.m. EDT while Credit Suisse was up 1.8 percent at 78.70 francs.
By contrast, Deutsche Bank shares eased 0.17 percent as concerns persisted about its exposure.
KITCHEN SINK
Rohner said he was removing top managers to accelerate a transformation in the investment bank and downplayed speculation UBS would seek to split the group into its two main units: investment banking and wealth management.
Investment bank head Huw Jenkins, who drove a rapid expansion in UBS's bid to join the top five investment banks worldwide, will leave along with Group Chief Financial Officer Clive Standish. Continued...
