Home News ROUNDUP: Switzerland’s largest bank writes off subprime investments

ROUNDUP: Switzerland’s largest bank writes off subprime investments

Published on 11/12/2007

Zurich-based UBS, which is Europe's largest bank by assets, said it now expected to record a net group loss for the fourth quarter and possibly the whole of 2007 in contrast to expectations in October that it would make a profit.

It also announced it was raising 13 billion Swiss francs (11.5 billion dollars) from investors in Singapore and the Middle East.

The Government of Singapore Investment Corporation Pte Ltd (GIC) was investing 11 billion Swiss francs, while an undisclosed strategic investor in the Middle East was investing a further 2 billion.

UBS chief executive Marcel Rohner said: "Conditions in the US mortgage and housing markets have continued to deteriorate, and we have updated our loss assumptions to the levels implied by the current distressed market for mortgage securities."

The ultimate value of UBS subprime holdings was still unknowable and had been "distracting," he said.

"In our judgement these writedowns will create maximum clarity on this issue and will have the effect of substantially eliminating speculation."

It came at a time however when most of UBS’s businesses were generating close to record levels of profit, he said.

"I am confident that, after these writedowns and with a strong balance sheet, we are well positioned for growth and profitability."

UBS chairman Marcel Ospel said the losses in the US mortgage securities market were "substantial" but could have been absorbed by the bank’s earnings and capital base.

"Nevertheless, it is important to always maintain a notably strong capital position to support the continued growth of our wealth management business, which is the largest generator of value to UBS shareholders," he said. DPA 2007