UBS AG Reports $11.4 Billion Loss And $14 Billion Write-Down As A Result Of Subprime Meltdown
According to Elena Logutenkova and Elizabeth Hester of Bloomberg.com, January 2008 was a horrific month for Europe’s largest bank. On January 30, Zurich-based UBS AG posted the biggest loss ever by a bank totaling approximately $14 billion. This large write-down caused the bank to post a net loss of $11.4 billion for the quarter.
UBS AG’s losses were larger than the $9.83 billion loss reported by the largest U.S. bank, Citigroup. Two additional New York based companies, Morgan Stanley and Bear Stearns Co., also reported record losses.
Director of Geneva’s Ethos Foundation, Dominique Biedermann, describes UBS’s loss as “enormous” and has called for an independent audit of the company. "[The investment wiped] out profit and shows that an inquiry is needed to make sure it doesn't happen again, and eventually whose responsibility this is,'' Biedermann said.
UBS markdowns directly linked to the subprime market increased from $10 billion to about $12 billion. The additional $2 billion in write downs were based solely on the declining market values of U.S. residential mortgage securities.
Although UBS will not publish details of other residential mortgage holdings until February 14, Wednesday’s disclosure brings total write downs on debt and leveraged loans to $18.7 billion for quarters three and four.
On Wednesday, Standard & Poor's lowered its credit rating for UBS from stable to negative. S&P also lowered its rating on UBS's biggest Zurich-based competitor, Credit Suisse Group, from positive to stable.
In December, UBS chairman Marcel Ospel and CEO Marcel Rohner advised analysts and investors that record losses were the result of positions created "by a small group of people in one team.''
"One has to question the management's ability to recognize the problems that have existed and continue to exist,'' said chairman of New York-based Holland & Co., Michael Holland. "When you're talking about an $11 billion issue and it's Jan. 30, this raises questions about who is watching and what did they know,'' Holland said.
When will the full extent of the subprime debacle be known? This collapse has already led to more than $130 billion of losses and markdowns at banks and securities firms since June 2007.
