The Swiss bank's latest hit takes its total subprime losses to $18 billion—and counting. Will its wealth management business suffer? The $4 billion writedown announced by UBS (UBS) on Jan. 30 doesn't come as a huge surprise. As far as is known, UBS has the largest exposure among European banks to U.S. subprime mortgages and collateralized debt obligations (CDOs), and the value of these securities is continuing to deteriorate—hence the need to acknowledge further losses. Other banks also are expected to take further hits.
"European banks involved in U.S. subprime will be making further writedowns," says Simon Adamson, an analyst at debt specialists CreditSights in London. Other European banks with potential for additional subprime losses include Royal Bank of Scotland (RBS.L), Deutsche Bank (DB), Crédit Agricole, Credit Suisse (CS), and Barclays (BCS), Adamson says.
UBS's foray into the U.S. mortgage markets has turned into an absolute nightmare. The bank, which had been considered one of Europe's best-managed financial institutions, has now written off a staggering $18 billion in exposure to subprime and other risky securities—comparable to the $16.7 billion in losses taken by Merrill Lynch (MER) and the $18 billion hit taken by Citigroup (C).
With UBS's overall exposure to potentially toxic debt estimated by Adamson at $29 billion, this may well not be the last such announcement from the bank's stone-fronted Zurich (Switzerland) headquarters. UBS now acknowledges that on Feb. 14 it will report a loss of about $4 billion for 2007.
Business Week 
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