Swiss bank UBS warns of big losses

ZURICH: Swiss banking giant UBS warned on Monday it would likely suffer a 600-800-million Swiss franc loss in the third quarter as a result of a meltdown in the US subprime, or high-risk, mortgage market.   

Another Swiss banking giant, Credit Suisse, said its investment banking and asset management operations could also be adversely affected by recent market turbulence but that it still expected to turn a profit in the third quarter.   

UBS, Switzerland's leading bank, warned in a statement that it would likely post a pre-tax loss of between 362 and 482 million euros (515-685 million dollars) in the third quarter.   

The profit warning came after weeks of turmoil in the global banking system, which has been hit by a credit crunch following the collapse of the US market for high risk loans.   

In mid-September the crunch forced British lender Northern Rock to apply for the emergency funds from the Bank of England. And on Friday the German bank IKB issued a profit warning that also blamed the US subprime crisis.   

UBS said on Monday it would sustain 'substantial losses' mainly on its holdings of securities linked to the US subprime residential mortgage market, which has been hit by a wave of foreclosures as housing prices plunge.   

It had warned after publication of second quarter results that it foresaw a weak showing in the third quarter.   

"However, the deterioration in the US subprime ... market, especially in August, was more sudden and more severe than in recent history, and markets became illiquid.   

"This led to substantial valuation losses, including in securities with high credit ratings," UBS said.   

Chief executive Marcel Rohner said that despite the third quarter perfromance, UBS still expected to end the year with "a good level of profits and in a strong capital position."   

UBS said that its head of investment banking, Huw Jenkins, would step down, with the position filled by Rohner for the foreseeable future.   

It also announced that chief financial officer Clive Standish would retire and would be replaced by Marco Suter, currently executive vice chairman.   

As a result of the planned changes, overall staff numbers will fall by about 1,500 by the end of the year, UBS said.   

The bank said it saw pre-tax profit of 10 billion Swiss francs for the nine months ending September 30 but that its full year pre-tax results would most likely be below those for 2006.   

Credit Suisse said Monday it would post a net profit in the third quarter but cautioned that its investment banking and asset management results were likely to have suffered.   

Nevertheless, the bank said it had "no indication that its income from continuing operations after tax for the third quarter will fall outside the range of plus or minus 20 ppercent of 1.30 billion Swiss francs."   

For the first nine months of this year, Credit Suisse said it continued to expect net income at record level.   

The bank's third quarter earnings release will be published on November 1.