KEY POINTS:
SINGAPORE - Swiss bank UBS joined the ranks of casualties in the global fallout from the US housing sector, warning investors last night it will write down US$3.4 billion ($4.47 billion), mainly on securities related to the US subprime mortgage market.
The warning would underline concerns about tight credit markets after short-term lending rates jumped on Friday, dashing hopes from earlier last week that credit conditions were easing.
UBS, the world's largest wealth manager, said it would write down 4 billion Swiss francs, mostly in fixed-income assets, that would result in a third-quarter loss of as much as 800 million Swiss francs.
UBS, which said it will reorganise management, joins the ranks of other global banks that have reported hits from a downturn in the US housing market that is reverberating globally.
Morgan Stanley, for example, recorded sales and trading losses of US$940 million after marking-to-market loans on its books, while Lehman Brothers wrote down some US$700 million of residential mortgage positions and loan commitments.
Sources familiar with the situation said last week that Deutsche Bank could suffer up to €1.7 billion in write-downs on its leveraged loan book, raising questions among investors as to whether similar banks could face the same fate.
"That is just a reminder that there is still some ghost in the woodwork that spooks the markets. I suspect we will see a repeat of this process a few more times: There will be some economic data showing that the economy is still doing alright and that will trigger stock rallies and then we'll get a headline like this," said David Cohen, an economist at Action Economics.
Illustrating the reach of the sub-prime crisis, Australian hedge fund Basis Capital has proposed splitting its surviving fund in two to save the business, which was swept up in the crisis.
- Reuters
