UBS Writes Down $14 Billion, Loses Money for Year
UBS said its mortgage-related losses were $4 billion more than expected in the last three months of 2007. The company wrote down $18.7 billion for the year.
UBS said Wednesday its quarterly losses related to subprime mortgages would be more than its earlier estimate and that the company lost money in 2007.
The company said it would write down $14 billion in the fourth quarter, with $12 billion related to subprime losses and $2 billion related to other residential mortgage positions.
That brings total writedowns for the year to $18.7 billion. UBS said in December it expected to write down $10 billion in the last three months of 2007.
UBS posted a 12.5 billion Swiss franc ($11.45 billion) loss for the last three months of 2007 and a full-year loss of 4.4 billion francs. The bank had previously left open the possibility of a full-year loss, depending on its performance in the final quarter.
UBS is one of the hardest-hit banks worldwide from the credit crisis that has caused over $100 billion in losses, gashed balance sheets and forced some of the proudest institutions like UBS, Citigroup and Merrill Lynch into emergency capital-raising measures.
The surprise announcement adds to the sense of chaos in Western banking after Societe Generale last week shocked with a $7 billion loss it blamed on a lone trader -- the worst trading loss in history by far.
The numbers are "another blow to the credibility of UBS" but do not affect the company's future performance and retail banking and asset management should perform well in 2008, WestLB analyst George Kanders wrote in a research note.
Kanders kept his "buy" recommendation on the stock.
Shares of the company slid sharply at the start of trading and closed 1.6 percent lower. UBS declined to comment to CNBC Europe.
The group last month announced a 13 billion Swiss franc capital injection from Singapore and an unidentified Middle East investor and hopes to convince shareholders to approve the plan at an extraordinary meeting on Feb. 27.
UBS is now struggling to restructure its investment bank and repair its credibility after the staggering losses, which have pushed its shares 40 percent lower over the past year.
The group said it managed to reduce its balance sheet and risk weighted assets during the quarter, which resulted in a loss, and that it will report a BIS Tier 1 ratio -- a measure of capital safety -- of 8.8 percent as of Dec. 31.
The Swiss bank's huge losses, which have prompted calls for it to spin off its investment banking business and concentrate on its highly successful wealth management activities, stem from a disastrous hedge fund venture into subprime mortgages.
-- Reuters contributed to this report