UBS Reports Exposure in US Mortgages
Thursday Swiss bank UBS stated that it has 26.6 billion in exposure to risky U.S. mortgages distinct from sub-prime loans, increasing its vulnerability to the global credit crisis and sending its shares sharply lower.
"This will raise concerns about further major write-downs in 2008," said Bear Stearns analyst Chris Wheeler in a note.
UBS reported that the newly unveiled exposure, announced together with full-year and fourth-quarter results, was to so-called Alt-A mortgages, which are of higher quality than sub-prime loans but also considered risky.
UBS has taken about $18 billion of dollars in write-downs on its exposure to U.S. sub-prime mortgages, which at the end of December amounted to a net $27.594 billion, making it one of the biggest casualties of the global credit crunch.
Chief Executive Marcel Rohner said he could not say if UBS would return to profit in the first quarter, after posting a fourth-quarter loss roughly in line with guidance it gave in a profit warning last month.
Analysts said UBS could report more losses in the first quarter on sub-prime exposure it has hived off into a special "workout portfolio" in order to sell the securities.
"There will be a separate workout book, and that will presumably be separately reported. I would imagine that would make a loss in the first quarter," said Derek Chambers at Standard & Poor's Equity Research.
Published on February 14, 2008
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