UBS to Write Down Another $19 Billion
From the New York Times: “UBS, the largest Swiss bank, said Tuesday that it would write down another $19 billion related to the American real estate market and said that its chairman, Marcel Ospel, would step down.”
UBS said the write-down would result in a first-quarter loss of about 12 billion Swiss francs, or $12 billion, and that it would seek new capital of about $15 billion, the second time it has announced plans to raise money since the credit markets began to contract.
The UBS board proposed that Peter Kurer, the bank’s general counsel, take over as chairman, pending shareholders’ approval at a meeting April 23.
The news comes on the say day that the Deutsche Bank warned that market conditions “have become significantly more challenging during the last few weeks.” Germany’s biggest lender went on to say that “it expected to write down about 2.5 billion euros, or $3.9 billion, on real estate loans and assets from the United States.” Its “fourth-quarter 2007 profit fell 48 percent from a year earlier, to 953 million euros.”
And so, the economic troubles in the US are hitting Europe. If we look at the stockmarkets and at the Euro, we see that Europe is doing relatively well, still, but one gets the impression that, perhaps, we just suffer the blow weeks after the US suffers it.
More:
A banking analyst at Dresdner Kleinwort in London, Folkert Jan Van der Veer, said, “Based on what we’ve heard for the last few months, it’s no surprise that a bank like UBS, with significant market exposure, is coming out with sizeable write-downs.”
“If the markets remain difficult,” he said, “you can’t rule out that further write-downs will follow.”
Mr. Van der Veer said the fact that the rights issue was fully subscribed meant that UBS’s “capitalization remains relatively strong.” UBS said its tier-1 capital ratio, a measure of financial strength, would stand at about 10.6 percent after the new capital infusion.
I trust this man. He has a good name (my grandfather’s name was Folkert, my father’s name is Jan).
And:
In a statement, the UBS chief executive, Marcel Rohner, said “the environment remains difficult, and while we are committed to further substantially reducing our exposures we do not want to undertake sales of positions at severely distressed levels.”
UBS is segregating its assets related to the American residential real estate market into “a portfolio work-out unit, separating these positions from its other, profitable businesses,” it said, and it left open the possibility that the unit would eventually be divested.
UBS had a 12.5 billion franc loss in the fourth quarter of 2007.
UBS, then, is likely to write off more in the coming months it seems.
Meanwhile, the stocks of most banks went up today. The reason: “People were expecting further write-downs and now there’s a little more certainty about the situation, so in the short term there is some relief,” Carlos Garcia, senior banking analyst at ING Financial Markets in Madrid, said. UBS’ stocks went down 58% over the last year, but rose 8.5% today.
However, he remains concerned about “those banks that have not been more aggressive about marking down their securities portfolios and which had low capital ratios.” Many European banks are, he said, “still in denial” about the bad loans on their books.
