Related - UBS To Announce 3Q Loss Projection Monday -Sources
By Jason Singer, Carrick Mollenkamp and Randall Smith
Of THE WALL STREET JOURNAL
Swiss banking giant UBS AG (UBS) is expected to report a large loss from its fixed income division for the third quarter Monday, according to people familiar with the situation.
UBS, in total, is projecting a third-quarter loss of CHF600 million to CHF700 million based on a writedown of CHF3 billion to CHF4 billion for fixed income assets, other people familiar with the matter said.
(This story and related background material will be available on The Wall Street Journal Web site, WSJ.com.)
The bank is reporting the fixed income loss ahead of its third-quarter results, which are due Oct. 30. The bank in August told investors that the third quarter would be difficult if credit markets continued to struggle.
Its losses resulted from applying sharply lower market values to asset-backed bonds, after it took a conservative view of where these securities will be trading for the near term, according to people close to the matter. Many banks had serious troubles with securities tied to mortgages when liquidity dried up in the last quarter.
The bank came up with the loss report for its fixed-income division, which includes asset-backed bonds, including those underpinned by U.S. mortgages. A spokesman at UBS headquarters in Zurich declined to comment.
UBS in July ousted its chief executive after shuttering an in-house hedge fund Dillon Read Capital Management that experienced losses on many of the same fixed-income products. The newly appointed CEO, Marcel Rohner, said shortly after taking control that he would pursue a more conservative strategy, limiting growth of UBS's investment bank.
In August, when UBS reported second-quarter profit, the bank flagged that more problems loomed when it said that if difficult market conditions continued through the third quarter, profit from trading stocks and bonds would be weak and lead to lower second-half profit.
On Friday, UBS shares rose 0.72% to CHF62.60. UBS shares have fallen 15.5% this year.
The latest losses are in part a result of continued costs of writing off Dillon Read Capital Management's soured mortgage bets, but they are also a result of other securities held by the fixed-income division. The release coincides with the first day of the fourth quarter.
By Jason Singer, Carrick Mollenkamp, Randall Smith and Edward Taylor, The Wall Street Journal |
