Top Firm Posts Biggest Ever 4th Quarter Loss
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The Swiss bank wrote-down some $13.7bn in assets in the period, $9.6bn on subprime CDOs, $2bn on Alt-A-mortgages, $871m on credit protection purchased from monoline insurers, $500m on commercial real estate and $200m on loans from leveraged buy-outs. The bank reconfirmed Thursday that the majority of the losses were down to 'a small group of people in one team'. UBS's share have fallen 36% over the last 6 months (22% just this year).
UBS also warned that 2008 would be 'another difficult year', and confirmed that it had improved risk controls and would curb fixed income prop trading, focusing instead on execution-only orders for clients. The bank also said that there were likely to be further job losses at the investment bank, particularly in fixed income.
CEO Marcel Rohner said that 'last year was one of the most difficult in our history...Whilst most of our businesses continued to be very profitable, the sudden deterioration in the US housing market, in combination with our large exposure to subprime mortgage-related securities and derivatives, has driven us into loss for the year'.
In the meantime, UBS has appointed 22-year Morgan Stanley veteran Jerker Johansson as the new CEO of the investment bank, following a 4 month search. The news of Johansson's appointment was generally received in a lukewarm manner. JPMorgan analyst Kian Abouhossein wrote in a note to investors that 'we welcome (the appointment of) an outsider as new CEO of the investment bank, looking at the group with fresh eyes and ideas....(However) we would like to see a more fixed-income experienced CEO considering we are dealing with fixed-income related problems'.
Commerzbank has posted a 44% fall in fourth-quarter profits. Net income came in at $293m, following $354m of US subprime lending-related write downs.
Reuters reports that Citi is to inject $3.3bn into 6 of the 7 SIVs it recently brought onto its balance sheet. The move is required to shore up the vehicles' credit-ratings and to protect investors.
Finally, Legg Mason was forced to issue a denial Wednesday that one of its money market funds had fallen below $1 per share in net asset value. Spokesperson Mary Athridge said that 'apparently there were rumours going around on e-mail this morning that one of the...money funds broke a buck today. It's not true'.
