UBS reports Q4 net loss of $11 billion linked to US subprime woes 14/02/2008 00:00

UBS AG on Thursday posted a fourth-quarter net loss of CHF12.45 billion, capping a year hit hard by bad investments in U.S. subprime mortgages. It said 2008 would be difficult too.

14 February 2008

ZURICH - UBS AG on Thursday posted a fourth-quarter net loss of CHF12.45 billion, capping a year hit hard by bad investments in U.S. subprime mortgages. It said 2008 would be difficult too.

Switzerland's largest bank said subprime losses also pushed it into the red for the full year, the first full-year net loss since 1997 when the bank was created from a merger of two major Swiss lenders. It said it expected more problems in 2008.

The fourth-quarter result, in line with the bank's forecast at the end of January, compared with a net profit of CHF3.4 billion in the same period of 2006.

The net loss for the full year was CHF4.38 billion francs, compared with a profit of CHF12.26 billion in 2006.

''Last year was one of the most difficult in our history,'' said Chief Executive Marcel Rohner. ''While most of our businesses continued to be very profitable, the sudden and serious deterioration in the US housing market, in combination with our large exposure in subprime mortgage-related securities and derivatives, has driven us into (a) loss for the year.''

The bank added in a statement: ''UBS expects 2008 to be another difficult year.''

The losses have resulted in spiraling write-downs totaling US$18.4 billion so far and have forced UBS to seek CHF13 billion in fresh capital from Singapore's government fund and an unnamed Middle East investor.

UBS shares, which have slumped 22% this year on fears of even greater losses, dropped 0.78% to CHF40.54 francs on the Zurich exchange.

UBS has fired numerous executives as a result of the losses, including Chief Executive Peter Wuffli, investment banking head Huw Jenkins and financial chief Clive Standish.

The bank said it still holds US$27.59 billion in securities linked to the US subprime residential mortgage market, down from US$38.77 billion in September.

Analysts said they were reassured that UBS appears to be reducing its holdings of toxic securities.

Net new money inflows - a closely watched gauge of future revenue - was positive thus far in 2008, Rohner told a conference call.