1.28 AM Sunday, 3 December 2023
  • City Fajr Shuruq Duhr Asr Magrib Isha
  • Dubai 05:26 06:45 12:11 15:10 17:32 18:50
03 December 2023

UBS set to announce historic loss



Switzerland's largest bank, UBS, is expected to announce the biggest loss in the country's history when it releases Tuesday its results for 2008, a year that saw the national icon tarnished by the subprime crisis.

But if there is a silver lining for the bank, which has been the target of a huge state rescue package, it lies in the fact that analysts say UBS has now hit bottom after its stock price fell 82 per cent since the summer of 2007.

For that reason, the loss of nearly CHF20 billion ($17.2 billion dollars) the bank is expected to announce for 2008 on Tuesday should not surprise markets, analysts say.

"The bank has already publicised its problems to a large degree and the fall in the stock price should not be so large," said a trader in Zurich.

Last November, UBS posted a net profit of CHF296 million for the third quarter following a year of losses, but warned that a renewed loss was looming for the following quarter.

The numbers expected to be unveiled Tuesday are staggering, reflecting the fact that UBS was one of the banks hardest hit by the US subprime loan crisis.

Its annual net loss is believed to be between CHF14.1 and 19.4 billion, according to estimates from Swiss financial news agency AWP.

The loss for the fourth quarter alone is expected to be between CHF5.9 billion and 7.5 billion for the bank, which has already written down about $46.9 billion worth of assets.

"The fourth quarter was clearly difficult for UBS," a Deutsche Bank commentary said, adding however that removing "toxic" non-liquid assets with help from the Swiss central bank along with restructuring efforts meant "UBS has passed the worst".

Customer confidence in the bank has in turn taken a hit, posing a major problem for UBS, which has hemorrhaged capital as a result. Customers pulled some 83.6 billion from the bank in the third quarter.

Under a rescue plan unveiled in October, the Swiss government injected 6.0 billion francs in new capital to UBS and lent $54 billion to the bank to transfer its non-liquid assets into a separate fund.

The massive spread of so-called "toxic" assets - mainly linked to financial instruments now worth very little because of the US home-loan crisis - throughout the global banking system is at the core of the crisis since it broke in August of 2007.

The bank also said in January that it would slash more jobs from its trading unit, adding to 9,000 job reductions already announced over the past year.

With its reputation tarnished, the damage only became worse when UBS decided to go ahead with bonus payments, sparking accusations that it was misusing the rescue money.

Swiss media have reported that the payments total two billion Swiss francs instead of the initially planned three billion.

As a result of the controversy, the bank has found itself caught between employees threatening legal action if the bonuses are not distributed and public opinion firmly against the payments.

Last month, the facade of UBS's headquarters was bombarded with coloured paint bombs.

On top of those concerns, the bank is bogged down in legal troubles in the United States, where it has faced an investigation into whether it helped customers dodge taxes.

German bank WestLB estimates that 1.5 billion will have to be spent to settle the dispute.