MercoPress. South Atlantic News Agency

Sub-prime crisis costs top Swiss bank 37 billion US dollars

Swiss financial giant UBS has reported that its write-downs as a result of the sub-prime crisis have more than doubled to about 37 billion US dollars. It is the largest write-down by any bank since the credit crunch began.

UBS also announced that its chairman and former chief executive Marcel Ospel would not be seeking re-appointment. The bank has announced 19 billion of fresh asset write-downs on top of the 18.4 billion it wrote off in 2007, as the value of its assets has plummeted. UBS added that it was seeking to raise 15 billion Swiss francs (15 billion US dollars) in capital by issuing new shares. Its losses dwarf those declared by US banks such as Citigroup (21.1 billion) and Merrill Lynch (22 billion). The UBS announcements came as it said it expected to post a first-quarter net loss of 12.1 billion. The firm said that the next chapter of the firm's history would be one of "discipline and determination". "There will be other chapters which will not be perfect but none will be like the ones we have just written". The US sub-prime problems have hit the balance sheets of banks worldwide and have cost several leading bankers their jobs. Mr Ospel had previously said that he wanted to stay at the company for another year. "I have always stated that I ultimately take responsibility for the bank's situation," he said. "We have worked very hard and have been able to address the firm's most pressing problems, thereby laying the foundation for the long-term success of the bank". He will be replaced by Peter Kurer, a 58-year-old Swiss lawyer who has spent the last seven years as the bank's main legal adviser. Mr Ospel said that his successor had considerable experience of the banking sector "and importantly of this bank". UBS has also unveiled plans to create a new business that would handle US property assets which had become worthless. It said that it was confident that this would "deal effectively with the firm's real estate exposures and allow the bank to focus on strengthening its core operations". Mr Osler said that a decision would be made "within weeks" about how many jobs would go at the firm. UBS management warned that it expected 2008 to be a difficult year for the firm and the industry as a whole. In 2007 it reported its first annual loss since UBS was created from the merger of Union Bank of Switzerland and Swiss Bank Corporation in 1998. Sub-prime loans were lent to US homebuyers with low incomes or with patchy credit ratings. These investments quickly soured as higher interest rates pushed up mortgage payments and triggered a wave of defaults. As well as resulting in the collapse of Bear Stearns, it has also hit other big Western banks, including Wall Street giants Merrill Lynch, Citigroup and JP Morgan Chase. Deutsche Bank in Germany has also warned it expects to write off about 3.9 billion US dollars in the first three months of 2008 because of the sub-prime crisis. The firm, due to issue its quarterly results at the end of April, blamed the current global credit turmoil. It said that conditions had become "significantly more challenging" during the last few weeks. In February, Deutsche Bank reported a 48% fall in profit for the last quarter of 2007. And in October last year, Deutsche Bank revealed a 2.2 billion Euro exposure to US sub-prime debt. The bank is eyeing a pretax profit of 8.4 billion Euros, down from 8.7 billion Euros last year.