UBS expects subprime losses of $680 million in third quarter

LOSSES & LAWSUITS

The investment bank has reported it expects third-quarter losses of up to Sfr800 million, mainly due to investments tied to subprime assets.

Marcel Rohner, chief executive of UBS, says: "Our first quarterly loss in nine years is an unsatisfactory result, especially after such a strong first half. I have therefore taken decisive action to be as transparent as possible."

UBS's losses outstripped those of its rivals "because we are overweight in the US subprime market, with much higher volumes in a market that has for many years had low volatility," says Rohner.

Senior departures include chairman Huw Jenkins. Rohner now takes the wheel. Jenkins will serve as an adviser to Rohner, who has only been chief executive since Peter Wuffli left in July. Mark Suter, executive vice-chairman, replaces Clive Standish as CFO and Walter Stuerzinger, group chief risk officer, is the new chief operating officer, corporate centre.

UBS had already closed its hedge fund operation, Dillon Read Capital Management, after Sfr380 million in subprime losses. Its approach to write-downs has been equally ruthless. Rohner says it is comfortable with its "rigorous approach" and, while hoping for better results in Q4, has not ruled out further depreciation. It still holds $19 billion of subprime assets. Some 90% are triple-A rated, and 80% have a weighted average life of less than three years. Rohner welcomes the effect the Fed's 0.5% cut on interest rates might have on the market.