Subprime losses mount on UBS

ZURICH – Switzerland’s biggest bank, UBS, yesterday set out plans to reorganise itself as it posted a second-quarter net loss and took a further writedown of N$5,1 billion on subprime-related positions.

With its second-quarter net loss reaching 358 million Swiss francs (221 million euros, US$329 million), it expected no improvement in adverse market conditions during the second half of the year. In a separate statement, it announced plans to split up its business divisions into three autonomous units in the wake of the subprime crisis, with staff bonuses to be aligned with each unit’s financial results.Doing so, it said, would make UBS “more effective and agile in managing trends in the financial industry.””In the second half of this year, UBS does not expect to see any improvement in the adverse economic and financial market trends that affected this quarter’s results,” it said.It would therefore continue to cut jobs, costs and risks, added the bank, which counts among Switzerland’s key employers.UBS shares dipped on opening, but soon gained 2,7 per cent to 23,8 Swiss francs on the Zurich stock exchange, against a weak overall market which was down 0,42 per cent.Financial analysts from Bank Wegelin noted that while the second quarter figures were “disappointing”, the bank’s restructuring could be “viewed positively”.UBS has been hard hit by the subprime crisis in the United States, having previously already written down more than US$37 billion on its subprime-related positions.Its latest quarterly loss was however, an improvement from its staggering first-quarter setback of 11,54 billion francs – offset in part by a tax credit.Woes piled up in the second quarter, however, with net new money outflows reaching 43,9 billion francs as clients took their assets elsewhere.The biggest outflow of 24,5 billion francs was posted by its global asset management business, while outflow of its two wealth management businesses reached 17,3 billion francs.In a telephone conference, the bank’s chief executive officer Marcel Rohner said: “We think we have reached the trough of the wave on the net new money outflow…that would take time to come back to a more normal level.”UBS chairman Peter Kurer, explaining the bank’s restructuring, said that following a review of operations, several weaknesses had been identified from its “one firm” business model.”Some of these weaknesses – such as the blurring of the true risk-reward-profile of individual businesses – are the source of substantial risk, as we have seen in the past few months,” he said.”Others have led to the creation of excessively elaborate processes and unnecessary layers of complexity.”The new structure would “create a spirit of transformation, clear accountability and transparency, and will allow us to optimise funding and capital usage.”Just a year ago, UBS was practically a byword for safe, reliable and trustworthy investments.Nampa-AFPIn a separate statement, it announced plans to split up its business divisions into three autonomous units in the wake of the subprime crisis, with staff bonuses to be aligned with each unit’s financial results.Doing so, it said, would make UBS “more effective and agile in managing trends in the financial industry.””In the second half of this year, UBS does not expect to see any improvement in the adverse economic and financial market trends that affected this quarter’s results,” it said.It would therefore continue to cut jobs, costs and risks, added the bank, which counts among Switzerland’s key employers.UBS shares dipped on opening, but soon gained 2,7 per cent to 23,8 Swiss francs on the Zurich stock exchange, against a weak overall market which was down 0,42 per cent.Financial analysts from Bank Wegelin noted that while the second quarter figures were “disappointing”, the bank’s restructuring could be “viewed positively”.UBS has been hard hit by the subprime crisis in the United States, having previously already written down more than US$37 billion on its subprime-related positions.Its latest quarterly loss was however, an improvement from its staggering first-quarter setback of 11,54 billion francs – offset in part by a tax credit.Woes piled up in the second quarter, however, with net new money outflows reaching 43,9 billion francs as clients took their assets elsewhere.The biggest outflow of 24,5 billion francs was posted by its global asset management business, while outflow of its two wealth management businesses reached 17,3 billion francs.In a telephone conference, the bank’s chief executive officer Marcel Rohner said: “We think we have reached the trough of the wave on the net new money outflow…that would take time to come back to a more normal level.”UBS chairman Peter Kurer, explaining the bank’s restructuring, said that following a review of operations, several weaknesses had been identified from its “one firm” business model.”Some of these weaknesses – such as the blurring of the true risk-reward-profile of individual businesses – are the source of substantial risk, as we have seen in the past few months,” he said.”Others have led to the creation of excessively elaborate processes and unnecessary layers of complexity.”The new structure would “create a spirit of transformation, clear accountability and transparency, and will allow us to optimise funding and capital usage.”Just a year ago, UBS was practically a byword for safe, reliable and trustworthy investments.Nampa-AFP

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