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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: kaydee who wrote (1254)	10/1/2007 12:28:56 AM
From: Paul Kern	Read Replies (2) \| Respond to of 71455

UBS May Report Third-Quarter Loss as Value of Debt Assets Drops By Christine Harper Oct. 1 (Bloomberg) -- UBS AG, Europe's biggest bank by assets, may report its first quarterly loss since 2002 as the value of fixed-income securities held by the bank declined. The Zurich-based bank probably will say today that it lost more than 600 million Swiss francs ($516 million) in the third quarter, with fixed-income assets shedding more than 3 billion francs in value, said a person familiar with the situation. UBS reported a profit of 2.2 billion Swiss francs, or 1.07 francs a share, a year earlier. The loss dealt another setback in fixed-income trading to UBS, which shut its Dillon Read Capital Management hedge fund unit in May at a cost of $300 million after bonds backed by subprime mortgages soured. The board responded in July by ousting Chief Executive Officer Peter Wuffli. While U.S. rivals reported quarterly profit even after taking losses on bonds and loans, UBS's other businesses weren't able to make up for the shortfall. ``If a bank puts itself in a position where it actually has lost money it suggests some serious mismanagement,'' said Richard Bove, an analyst at Punk, Ziegel & Co. in Lutz, Florida, who follows UBS's rivals in the U.S. ``Now we know why they changed the people at the top of the company.'' UBS was expected to earn 1.39 francs a share in the quarter, according to the average estimate of eight analysts surveyed by Bloomberg News. Rohini Pragasam, a spokeswoman in New York, declined to comment. The possible loss was reported earlier by the Wall Street Journal. U.S. competitors including Goldman Sachs Group Inc. and Morgan Stanley already have reduced the value of some fixed- income holdings after investors shunned mortgage-backed securities and high-yielding corporate debt, driving down prices. Merrill's Outlook Merrill Lynch & Co., the third-biggest U.S. securities firm, may record losses of as much as $4 billion on fixed-income assets, resulting in the lowest quarterly earnings in almost six years, Goldman Sachs analyst William Tanona said in a note to investors last week. New York-based Merrill may have to write down the value of mortgages, corporate loans and collateralized debt obligations, Tanona wrote in his report. UBS is down 15 percent in this year's trading in Zurich, a steeper drop than Credit Suisse Group's 9 percent decline or Frankfurt-based Deutsche Bank AG's 11 percent tumble. The fixed-income division at UBS has lagged behind rivals since 2005, when the bank moved 120 employees from the unit into the new Dillon Read hedge fund led by John Costas, who had been CEO of UBS's investment bank. While Dillon Read was profitable for outside investors, who had their $1.2 billion and gains returned to them, the bank's own $3.5 billion in invested capital lost value. In May, UBS said the fund would be shut and assumed all of its holdings. Default Concerns Fixed-income markets haven't recovered since then, with concern about defaults spreading from mortgage-backed securities to collateralized debt obligations and high-yield corporate debt used to finance leveraged buyouts. UBS's revenue from fixed- income sales and trading dropped 31 percent in the second quarter and the bank, which will report its full third-quarter results on Oct. 30, warned in August that ``turbulent conditions'' in the market might cause a ``very weak trading result'' in its investment bank for the rest of the year. In August UBS replaced Simon Bunce, the head of fixed income, with Andre Esteves, who runs the Latin American unit. Goldman Sachs, Morgan Stanley, Lehman Brothers Holdings Inc. and Bear Stearns Cos. last month reported earnings for their fiscal third quarter, which ended in August. While all but Goldman reported lower third-quarter profit, none reported a loss even after writing down the value of debt instruments. Goldman and Morgan Stanley are the two biggest U.S. securities firms, while Lehman and Bear are fourth- and fifth-biggest. Merrill, based in New York, ended its third quarter in September. To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net . Last Updated: September 30, 2007 21:51 EDT