| Major swiss bank hit hard from US housing { October 1 2007 } Original Source Link: (May no longer be active) http://afp.google.com/article/ALeqM5hEWQSyW4ONPq_NWmzdx_SN5ERLrAhttp://afp.google.com/article/ALeqM5hEWQSyW4ONPq_NWmzdx_SN5ERLrA
Swiss bank UBS warns of big losses, blames US housing crisis October 1, 2007
ZURICH (AFP) — Swiss banking giant UBS warned Monday that the crisis in the US housing market had cost it around 4.0 billion Swiss francs, as it announced a major management shakeup and plans to cut 1,500 jobs.
Switzerland's leading bank said it foresaw asset write-downs of around 4.0 billion Swiss francs (3.4 billion dollars, 2.4 billion euros) from its investment banking arm's fixed income, rates and currencies division.
The write-downs would likely result in a third quarter pre-tax loss of between 600 and 800 million Swiss francs, it said.
Another Swiss banking giant, Credit Suisse, said Monday its investment banking and asset management operations could also be adversely affected by recent market turbulence but that it still expected to turn a profit in the third quarter.
The warning at UBS came after weeks of turmoil in the global banking system, which has been hit by a credit crunch following the collapse of the US market for high risk loans.
In mid-September British lender Northern Rock was forced to apply for emergency funds from the Bank of England.
German bank IKB issued a profit warning on Friday that it too blamed the US high-risk market.
UBS said Monday it would sustain "substantial losses" mainly on its holdings of securities linked to the US subprime sector, which has been hit by a wave of foreclosures as housing prices plunge.
It had warned after publication of second quarter results that it foresaw a weak showing in the third quarter.
"However, the deterioration in the US subprime ... market, especially in August, was more sudden and more severe than in recent history, and markets became illiquid.
"This led to substantial valuation losses, including in securities with high credit ratings," UBS said.
Chief executive Marcel Rohner said that despite the third quarter perfromance, UBS still expected to end the year with "a good level of profits and in a strong capital position."
"Our first quarterly loss in nine years is an unsatisfactory result ... I have therefore taken decisive action to be as transparent as possible," Rohner said.
"I have also made appropriate changes, and will accelerate already-planned changes to the firm," he said.
UBS said that its head of investment banking, Huw Jenkins, would step down, with the position filled by Rohner for the foreseeable future.
It also announced that chief financial officer Clive Standish would retire and would be replaced by Marco Suter, currently executive vice chairman.
As a result of the planned changes, overall staff numbers will fall by about 1,500 by the end of the year, UBS said.
The bank predicted pre-tax profit of 10 billion Swiss francs for the nine months ending September 30 but that its full year pre-tax results would most likely be below those for 2006.
Credit Suisse said Monday it would post a net profit in the third quarter but cautioned that its investment banking and asset management results were likely to have suffered.
Nevertheless, the bank said it had "no indication that its income from continuing operations after tax for the third quarter will fall outside the range of plus or minus 20 ppercent of 1.30 billion Swiss francs."
For the first nine months of this year, Credit Suisse said it continued to expect net income at record level.
The bank's third quarter earnings release will be published on November 1.
Copyright © 2007 AFP. All rights reserved.
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