Top Firm May Be Forced To Take $18bn Writedowns In 2008

UBS shares closed 8.3% down Thursday, falling to their lowest levels for four years, after the bank posted a $11.3bn fourth-quarter loss, taking 2007's full-year loss to $4bn.

The rub that spooked the market, however, was the fact that the bank revealed that it had an additional $26.6bn of exposure to the Alt-A US mortgage market. Analysts at Banc of America and Deutsche have now downgraded UBS, with Deutsche analyst Matt Spick saying in a note issued Thursday that 'further writedowns are likely in at least the first quarter, further impairing confidence and raising the risk of market share losses'. Spick lowered his stock rating on the bank from 'buy' to 'hold'.

Reuters quotes Fox-Pitt Kelton analyst David Williams, who said that 'they (UBS) have $60 - $70bn worth of exposure to troubled areas and the market did not know about much of it. They are in a sorry predicament. They have by far the largest exposure of any European bank and they cannot just trade out of it. The crisis at UBS will last as long as the credit crisis lasts'.

Worse still was the Citi view on UBS, issued in a note Thursday. Citi estimates that UBS might have as much as $80bn in exposures to under-pressure assets, which could result in between $11bn and $18bn of additional writedowns in 2008.

And finally the impact of all this on job losses over at UBS's investment banking unit is not good. Marcel Rohner, the bank's CEO, said Thursday that, in addition to the 1,500 jobs already cut, headcount is likely to fall to 21,000 'relatively rapidly' (the unit had 21,932 on the payroll as at the end of last year). Rohner said that the extent of any further job losses was dependent on the ongoing state of the markets.