November 15, 2007 / 2:21 PM / 13 years ago

UBS says not to expect massive Q4 writedown

ZURICH (Reuters) - UBS doused speculation on Thursday that it would make fourth-quarter writedowns in the order of $8 billion and said it did not yet know if it would make further charges in subsequent quarters.

“UBS does not expect writedowns greater than those implied in its outlook which means writedown numbers like $8 billion are not expected,” a UBS spokesman said, but added that in view of current market uncertainty, more writedowns beyond the fourth quarter could not be ruled out.

He said the Swiss bank was not keeping more writedowns in reserve with the intention of spreading the charges over several quarters. “We are not holding back further charges,” he said.

Analysts’ estimates of possible fourth-quarter writedowns varied widely, however, even after meetings with UBS Chief Financial Officer Marco Suter on Thursday, with some penciling in charges of as low as 2 billion francs and others forecasting up to 6 billion francs of writedowns.

UBS reported its first quarterly loss in five years at the end of last month after writing down 4.4 billion Swiss francs ($3.92 billion) of subprime-linked exposures.

The UBS spokesman made the comments after Suter met analysts in London who questioned him about the possibility of further writedowns on the bank’s estimated $39 billion of subprime-related exposures.

A meltdown in U.S. subprime mortgages — loans made to borrowers with patchy credit histories — has triggered billions of dollars in charges for banks on their exposures to bundles of mortgage-backed securities.

Some U.S. investment banks such as Merrill Lynch MER.N have resorted to “kitchen-sinking” their exposures — taking huge charges at a single stroke in order to reassure investors that they have drawn a line under the problem.

Barclays (BARC.L), Britain’s third-largest bank, on Thursday unveiled a 1.3 billion pound writedown for losses on securities linked to subprime, in a move welcomed by financial markets.

“He (Suter) said he does not think the $8 billion (writedown) number mentioned in the press is the one they will book,” said a London-based analyst with a major investment bank who met CFO Suter on Thursday.

DOUBTS PERSIST

But the analyst was not persuaded that UBS was not gearing up for more charges which would be carried over into next year. “That is a compromise they are willing to make,” he said.

The analyst said he believed UBS may have to make total writedowns of $8 billion but would book them over two or more quarters to avoid stretching its high capital ratios, which are key to the stability of its wealth management franchise.

But another London-based analyst who met Suter later said Suter’s insistence that the bank was not already preparing for further writedowns beyond the final quarter was unequivocal.

“He said they were are not being disingenuous and that they will take what writedowns need to be done in the fourth quarter and are not trying to defer the pain here,” said the analyst.

But he added that he believed fourth-quarter writedowns could be as high as 5-6 billion Swiss francs.

“Everyone is going to build in margins of safety,” he said, referring to analysts’ estimates.

Suter also conveyed the impression that, apart from any writedowns, UBS was having a good quarter, including in the investment bank.

A further analyst who met Suter at a separate meeting earlier in the week said the guidance he got implied writedowns in the fourth quarter of 2 to 3.5 billion Swiss francs. “That is what you are led to believe,” said the analyst.

Another analyst, Andreas Venditti at bank ZKB, said, on the strength of his meeting with Suter: “I was satisfied with my fourth-quarter assessments of around 2.5 billion Swiss francs of writedowns.”

Venditti said he met Suter at the start of the week.

Editing by Quentin Bryar/Rory Channing

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