SWISS BANK UBS, the European bank hardest hit by the credit crunch, wrote down a further $5 billion (€3.3 billion) on the value of its assets and reported its fourth quarterly loss in a row after it was hit by deposit withdrawals, writes Simon Carswell.
The fresh writedowns push the bank's total since the credit crisis began to $42 billion and into third place behind Citigroup ($47 billion) and Merrill Lynch ($46 billion) for investment writedowns related to the credit crunch.
The Zürich-based bank, the world's leading bank to the rich, said that it would separate its troubled investment bank from its wealth management division, paving the way for the sale of the business that had made it largest European casualty of the crisis.
The bank succumbed to shareholder pressure to restructure the company, admitting that there were problems keeping the two business integrated. "It might be that we keep or divest or enter into joint ventures or collaboration," the bank's chairman Peter Kurer said, adding there were no plans to sell parts of the bank.
UBS lost $41 billion as investors moved their money to competitors including smaller Swiss banks. Clients of the wealth management unit removed 17.3 billion Swiss francs (€10.6 billion) more than they invested in the second quarter.
Irish bank shares finished the day in negative territory as investors reacted to the fresh write-downs and poor outlook at UBS.
Anglo Irish Bank was the worst performer, shedding 11.8 per cent to close at €6.02, ahead of its pre-close trading statement today. Irish Life Permanent fell 9.4 per cent to €6.15. AIB dropped 4.1 per cent to €8.85, while Bank of Ireland lost 3.3 per cent to €6.10.
The Iseq index closed down 2.5 per cent at 4,570 points.
UBS reduced its operating costs by 18 per cent in the second quarter, in part by cutting thousands of jobs, but said the financial markets would not improve and warned that the remainder of the year would be as difficult as the first six months of the year.
"The positive sentiment seen at the end of first quarter 2008 . . . was short-lived, as trading conditions deteriorated significantly in the second half of May," it said.
UBS reported a larger-than-expected second-quarter net loss of 358 million Swiss francs (€220 million), compared with a 5.55 billion-franc profit a year before, though the three-month loss was helped by about 3.8 billion francs in tax credits.
UBS said it did not expect the "adverse economic and financial trends" would improve for the remainder of the year. The bank fell 2.4 per cent, leaving the stock down 51 per cent this year.
US stocks fell for the first time in three days after the country's second-largest bank JP Morgan Chase said it may post more credit losses, pushing the global cost for the subprime mortgage meltdown to more than $500 billion. - (Additional reporting, Reuters/ Bloomberg)
