This week is turning out to be the worst week for bad news this year. Kicking us off Monday was the news that UBS was to write-down a further $10bn in subprime lending-related assets. The bank will probably now post a full-year loss, Chairman Marcel Ospel has confirmed that he doesn't want and won't get a bonus, and the investment bank will continue to operate without a full time head (at least until the Swiss figure out what to do with it). And, all over the financial markets, everyone is wondering where the next shoe will drop. Although Citi is the obvious candidate, many feel that there's still some more pain to come over at Merrill Lynch too.
The Daily Telegraph reports that Dresdner Kleinwort is to make up to 200 staff redundant, many in the London-based credit unit, where up to 60 are thought likely to get the chop. Traders and other staff are also said to be in the firing line. Rumours of up to 350 staff losing their jobs this cull is thought to be somewhat wide of the mark.
The Times reports that firms such as Bank of America, Barclays Capital, Citi and Morgan Stanley are said to have frozen recruitment, although, in truth, not a lot of hiring typically goes on this time of year as the focus is on year-end bonuses.
Reuters reports analysts at CreditSights say that it could take Citigroup 3 years 'to recoup losses on any further substantial write-downs of its CDO obligations'. The company's CDO and SIV exposure could result in a dividend cut, a major asset sale, or even a forced merger with a rival like JPMorgan Chase.
The Financial Times reports that Citigroup has offloaded around $15bn of its troubled SIV assets in the last few weeks to junior investors. CNBC reports that Bank of America is to wind down its $12bn Columbia Strategic Cash Portfolio Fund, as its net asset value fell below the $1 per share that all such funds try to maintain. The fund has suffered from investments in SIVs.
Bloomberg reports that Societe Generale is to bail out its only SIV, Premier Asset Collateralied Entity (PACE), by taking $4.3bn of assets onto its balance sheet in order to avoid a firesale. The news agency also reports that hedge fund manager RAB Capital's earnings will come out flat this year 'after slumping investment returns reduced performance fees'.
And finally, the BBC reports that Germany's LBBW is said to have threatened to pull out of acquiring troubled Sachsen Landesbank unless the German state of Saxony agrees to cover the bank's (mostly subprime lending-related) losses with $5.95bn in guarantees.