Top Firm Takes Another $10bn Hit

UBS HQ Archway

UBS was the first firm to come out and fire its CEO a few months back (it started a trend), the first to announce significant losses as a result of US subprime lending-related problems, and the first to confirm that it was to embark on a major job cull (1,500 are losing their jobs over at the investment bank). The shock announcement today that the bank is to write off a further $10bn in subprime assets will serve notice to all those who thought we were over the worst.

In a statement issued today, the firm said that 'in response to continued deterioration in the US sub-prime mortgage securities market, partly driven by increased homeowner delinquencies but mainly fuelled by worsening market expectations of future developments, UBS has revised the assumptions and inputs used to value US sub-prime mortgage related positions. This will result in further writedowns of around $10 billion, primarily on CDO and 'super senior' holdings. In light of continued deterioration in the sub-prime market, valuations of UBS's remaining sub-prime positions reflect the extreme loss projections implied by the prices achieved in the very limited number of observable market transactions in US sub-prime related securities and indices up to the end of November'.

CEO Marcel Rohner said that 'in our judgement, these writedowns will create maximum clarity on this issue and will have the effect of substantially eliminating speculation'. The bank, which now expects to post a loss in the fourth-quarter (following the third-quarter loss recently announced), has also raised $11.5bn in additional capital from the Government of Singapore Investment Corp. and an undisclosed Mid-Eastern-based strategic investor. The move by UBS clears the way for other European firms to clear their decks ahead of the year-end.

Finally, Bloomberg reports that, according to figures released by the Bank for International Settlements (BIS), global bond sales fell a dramatic 66% in the last quarter as the credit markets tightened. BIS has also said that it expects the current credit squeeze to continue beyond the first quarter of 2008.

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