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| UBS suffers US sub-prime loan hit | |
| (about 5 hours later) | |
| UBS has said it will have to write down losses totalling 4bn Swiss francs ($3.4bn; £1.67bn) in relation to bad investments in risky US home loans. | UBS has said it will have to write down losses totalling 4bn Swiss francs ($3.4bn; £1.67bn) in relation to bad investments in risky US home loans. |
| The Swiss wealth manager admitted the hefty losses will lead to a slump of between 600m and 800m Swiss francs in its third-quarter earnings. | |
| UBS called the results, which mark the first loss for the bank in nine quarters, "unsatisfactory". | UBS called the results, which mark the first loss for the bank in nine quarters, "unsatisfactory". |
| It said it will now cut 1,500 jobs and carry out extensive management changes. | It said it will now cut 1,500 jobs and carry out extensive management changes. |
| UBS also suspended its share buyback programme in the wake of the extensive write downs. | |
| "The share buybacks are driven by profitability," said UBS chief executive Marcel Rohner. | |
| UBS is big enough to more than weather this storm BBC business editor | |
| "When the profitability returns, we'll also see buybacks, " he added. | |
| BBC business editor Robert Peston said: "The mess is doubly embarrassing for UBS since it took a substantial hit in the dry-run for this summer's market mayhem, the crisis afflicting the giant hedge fund, Long Term Capital Management, in 1998. | |
| But he added: "UBS is big enough to more than weather this storm." | But he added: "UBS is big enough to more than weather this storm." |
| Witch hunt | |
| Many analysts had predicted some losses at the Swiss bank after it warned recently that weak trading would result should "turbulent conditions prevail". | |
| But few had forecast the magnitude of the write downs relating to securities backed by risky sub-prime mortgages which have seen record defaults in the face of higher US mortgage rates. | |
| They are likely to send shivers down the spines of investors, who have harboured fears over how far the downturn in the US housing market has spread to the global economy. | |
| The concern is that UBS is not the only major financial organisation with skeletons in its cupboards. | |
| Rival Credit Suisse has already flagged up that it too will report lower third quarter results because of the damage caused by the sharp deterioration in the sub prime residential mortgage backed securities market. | |
| But, unlike UBS, it said quarterly earnings would still be profitable. | |
| Some visibility? | |
| As concerns about the global market continue, banks have refused to lend money to other banks. | |
| This has caused further problems in the money markets and forced central banks in Europe, the US, Japan and most recently the UK to make available billions of pounds at a more affordable lending rate than those on offer from their commercial counterparts. | |
| "Today's UBS news is certainly bad news," said Claudia Meier, an analyst at Vontobel. | |
| But she added: "On the other side, it finally gives some more visibility to the sub-prime fears and we expect the market to like this." |