Fallout has cost securities firms and banks more than US$30 billion in Q3.

(ZURICH) Swiss bank UBS said on Sunday that the slumping US housing market may lead to further writedowns on debt securities following the company’s first quarterly loss in almost five years.

UBS is still at risk from ‘further deterioration in the US housing and mortgage markets as well as rating downgrades’ on mortgage-related securities, the bank said yesterday in a Business Wire statement.

Fallout from the US sub-prime market cost the world’s biggest securities firms and banks more than US$30 billion in bad loans and trading losses in the third quarter. UBS, which ousted chief executive officer Peter Wuffli in July, will report a loss today after reducing the value of fixed-income securities and leveraged loans by about US$4.1 billion.

Analysts said they were inclined to interpret the statement, issued only one day before the formal announcement by UBS of its results, as a warning of more bad news to come.

‘They have not squashed it (the rumours of more writedowns), they have confirmed it,’ said one London-based analyst, who asked not to be identified.

‘We have further possible writedowns,’ said Javier Lodeiro, an analyst at Bank Sal Oppenheim here. ‘It’s difficult to remain positive when you have no visibility.’ UBS shares rose 25 centimes, or 0.4 per cent, to 62.2 Swiss francs by 9:17am Zurich time. The stock has fallen 16 per cent so far this year.

While the fourth quarter ’started with good results from all businesses’, UBS can’t assume it ‘will continue as positively as it has begun, or that the current difficulty is solved in the short term’, the bank said.

UBS reiterated that it will report a third quarter loss of between 600 million francs (S$749 million) and 800 million francs today.

Merrill Lynch & Co, the third-largest US securities firm, last week announced the worst quarterly loss in the company’s 93-year history after US$8.4 billion of writedowns, more than initially estimated.

UBS chief executive Marcel Rohner ousted investment banking chief Huw Jenkins on Oct 1 and announced plans to eliminate 1,500 jobs.

Mr Wuffli had already shut the Dillon Read Capital Management LP hedge fund, seeded in 2005 with US$3.5 billion, 80 top traders and investment bank head John Costas. — Bloomberg

Source: Business Times