UBS shocks investors with risky debt exposures

By Andrew Hurst and Thomas Atkins

ZURICH (Reuters) - Swiss bank UBS shocked markets with tens of billions of dollars in new exposure to risky U.S. mortgages, leveraged finance and complex securities, dramatically raising its vulnerability to the credit crisis.

The revelations, which included $26.6 billion in exposure to U.S. mortgages distinct from subprime loans, sent the bank's shares tumbling to levels not seen since 2004 as investors braced for even more writedowns.

UBS stock has lost more than half its value since last June after it took $18.1 billion of writedowns in the second half of 2007 alone on subprime-related exposures.

"They have $60-70 billion worth of exposure to troubled areas and the market did not know about much of it," said David Williams at Fox-Pitt, Kelton in London.

Deutsche Bank estimated that UBS's total exposure to risky U.S. mortgages was $68.7 billion.

"They are in a sorry predicament. They have by far the largest exposure of any European bank and they cannot just trade out of it. The crisis at UBS will last as long as the credit crisis lasts," said Williams.

Shares in UBS, which said it was facing another difficult year in 2008, were trading down 7 percent at 38 francs at 1500 GMT.

UBS also unveiled further exposures of $11.4 billion in leveraged finance -- loans made to fund buyouts of companies -- and of $11.2 billion to a complex securitization product called a U.S. reference-linked note program.