UBS subprime losses mount, bank deep in red
ZURICH (Reuters) - Subprime-related problems at UBS AG mounted on Wednesday as the Swiss bank unveiled $4 billion in new write-downs in a surprise statement and sank deep into the red for the year, depressing its shares.
The latest disclosure lifted the bank's total write-downs from the subprime debacle to $18.4 billion and will likely increase pressure on chairman Marcel Ospel, at the UBS helm during its push into risky U.S. investments, to resign.
UBS, world banking's leading wealth manager, 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, a grim closure to its worst performance in history.
UBS shares fell 2.2 percent as analysts puzzled over the new losses.
"One could become very emotional about UBS -- continuously behind the curve in write-downs and hence always topping-up, exposure disclosure is poor to new write-downs, and management leadership vacuum," said analysts at investment bank J.P.Morgan.
UBS is one of the hardest-hit banks worldwide from the credit crisis that has caused around $130 billion in losses, mangled balance sheets and forced some of the proudest institutions like UBS, Citigroup and Merrill Lynch into emergency capital-raising measures.
The surprise announcement adds to the sense of chaos in Western banking after Societe Generale last week shocked with a $7 billion loss it blamed on a lone trader -- the worst trading loss in history by far.
It also raised questions about further losses to come from UBS's remaining exposure to ailing assets and to the monoline insurance sector after the bank signaled that $2 billion of the writedowns were connected to the troubled bond insurers.
"So they said they had kitchen-sinked last time, have they really done it now?" said analysts at bank RBS in a note to clients. "UBS engaged in a remarkable volte face from the positive noises made by the CEO three weeks ago and also reneged on its claim to have kitchen-sinked everything on Dec 10."
RESISTANCE MOUNTING
UBS last month announced a 13 billion franc capital injection from Singapore and an unidentified Middle East investor and hopes to convince shareholders to approve the plan at an extraordinary meeting on February 27.
But shareholder resistance to the capital increase is growing, with shareholder groups Actares, Profond and Ethos plus several pension funds urging others to oppose the move.
UBS is now struggling to restructure its investment bank and repair its credibility after the staggering losses, which have pushed its shares 40 percent lower over the past year.
UBS said in a statement the results reflect $12 billion in losses from the U.S. subprime market, plus $2 billion in losses from other U.S. residential mortgages and that weak trading income dragged performance lower as well.
UBS had been scheduled to report results on February 14.
The group said it managed to reduced its balance sheet and risk weighted assets during the quarter, which resulted in a loss, and that it will report a BIS Tier 1 ratio -- a measure of capital safety -- of 8.8 percent as of December 31.
The Swiss bank's huge losses, which have prompted calls for it to spin off its investment banking business and concentrate on its highly successful wealth management activities, stem from a disastrous hedge fund venture into subprime mortgages.
In a sign that the subprime disaster may drag out for some time, the FBI this week said it is investigating 14 corporations over possible accounting fraud and insider trading violations in a crackdown on subprime lending. The companies were not named.
Switzerland's banking regulator said last month it would probe major subprime losses at UBS while Merrill Lynch disclosed in November that the SEC was investigating matters related to its subprime business.
(Reporting by Thomas Atkins; Editing by Jason Neely and Quentin Bryar)
