US mortgage crisis claims banking jobs and profits
Oct 31 2007 by Iain Laing, The Journal
INVESTMENT bank UBS has warned of further write-downs amid the fall-out from the US sub-prime mortgage crisis as it posted its first quarterly loss in nine years.
The Swiss bank said markets remained uncertain and cautioned there might not be a speedy resolution to the collapse of America’s high-risk home loan market and subsequent tightening in credit markets.
UBS posted operating losses of £302m in the three months to the end of September, with its exposure to crisis-hit US home loans leading to losses and write-downs of £2.2bn.
UBS expects its investment banking business to remain in the red until the end of the year, although it hopes the wider group will return to profitability in the fourth quarter.
The group’s losses follow last week’s news from US investment bank Merrill Lynch that the firm saw a £1.1bn net loss in the third quarter – its first loss in six years. Merrill was forced to write down £3.86bn because of its exposure to bad mortgage-related debt, leading to speculation that the bank’s boss Stan O’Neal is on the brink of stepping down.
At UBS, chief executive Marcel Rohner has overhauled the management team, taking personal responsibility for the investment banking division as chairman and chief executive.
He is cutting costs in the division, with about 1,500 jobs due to be culled by the end of the year.
The group said yesterday it was taking steps to “address the weaknesses that led to the losses”.
Management, the group’s structure and risk management are all being put under the microscope as part of the review.
UBS said its results were unquestionably disappointing, but it had been caught out by the severe and sudden collapse of the US sub-prime market.
Its investment bank division’s fixed income, currencies and commodities were among the hardest hit, reporting a £1.75bn revenue loss.
The group said the division “remains exposed to further deterioration in the US housing and mortgage markets as well as rating downgrades for mortgage-related securities”.
UBS has slashed staff bonuses as a result of the recent losses, and yesterday confirmed that personnel expenses were down 49%.
