The latest warning by UBS that it may face more writedowns, as well as last week's announcement by Merrill Lynch that it would have to write down $8.4 billion, show that the weakness in the financial sector is set to continue, analysts told CNBC Monday.
Investors have been bracing for more bad news from banks after Merrill Lynch's announcement, as it reflected a serious worsening of the conditions in the Collateralized Debt Obligations (CDOs) market.
Besides the liquidity squeeze, the dollar's weakness plays a major part in the banks' losses as well, Kevin Sullivan, from Clariden Leu, told "Worldwide Exchange."
"I think they've been hit by the revaluation of these subprime CDOs that they can't actually price and also the fact that, as the dollar declines, their dollar earnings also decline," Sullivan said.
"So I would expect over time, over the next six months or maybe a little beyond, (the weakness) to continue," he added.
UBS said it may face more writedowns on its fixed income portfolio but confirmed it would on Tuesday report a third-quarter pretax loss of 600 million-800 million Swiss francs ($515.9-$687.9 million).
Warning of More Bad News
Reacting to a weekend newspaper report saying more hefty writedowns would force it into a much bigger quarterly loss than first announced, UBS also said on Monday the fourth quarter had started well in all business areas, including its investment bank.