UBS expects $14 billion housing hit

UBS expects $14 billion housing hit
Swiss bank says bad bets on subprime mortgages will result in record fourth-quarter loss of $11.5 billion.

ZURICH, Switzerland (AP) -- UBS AG said Wednesday it expects a record loss for the fourth quarter, largely as a result of $14 billion of writedowns on bad investments in U.S. subprime mortgages.

Switzerland's largest bank said it expects a fourth-quarter loss of $11.45 billion. The full-year net loss - the first in its 10-year history - will amount to $4.03 billion.

UBS was formed through the merger of Union Bank of Switzerland and Swiss Bank Corporation in 1998, resulting in the world's largest wealth manager.

Earnings will be published on Feb. 14.

"These results reflect weak trading revenues in the fixed income, currencies and commodities business in the investment bank," UBS said in a statement.

The numbers "will include around $12 billion in losses on positions related to the U.S. subprime mortgage market and approximately $2 billion on other positions related to the US residential mortgage market," it added.

Shares in UBS fell 1.32 percent to $42.31 in Zurich trading.

Analyst comment was mixed with some saying the bank could be forced to make further writedowns this year and others saying the news was to be expected.

"The loss is higher than expected," said Andreas Venditti, an analyst with Zuercher Kantonalbank.

"The additional losses were especially disconcerting. This will probably lead to further uncertainty," he said.

UBS (UBS) said in December that it had around $29 billion in subprime holdings. The bank did not provide an update on its holdings Wednesday.

Peter Thorne, an analyst with independent brokerage Helvea SA, said the announced net losses are bad "but not a total shock."

"Given what US firms have reported lately, UBS seemed a bit light on their subprime exposure," he said, adding that the additional $2 billion loss linked to other segments of the U.S. mortgage market is not really surprising.

UBS in early December announced a $10 billion writedown from the U.S. subprime lending market, in addition to $3.6 billion written off in its third quarter. It then said it will post a loss for the fourth quarter and may record a full-year net loss.

The bank subsequently raised billions through share sales to sovereign wealth funds in Singapore and the Middle East. Government of Singapore Investment Corp. is invested $9.75, while an undisclosed investor in the Middle East purchased a $1.77 billion stake.

UBS had posted a third-quarter loss of $712 million.

In Wednesday's statement, UBS said it reduced its balance sheet and risk weighted assets during the fourth quarter. "This process included the sale of some positions at a loss," it said.

Earlier this month, UBS announced in an internal memo plans that it would close its principal finance unit in the United States and take other measures to revamp its investment bank.

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