UBS: $19.5 Billion in Write-Downs, Will Sell $15 Billion in Mortgages to BlackRock
As expected, UBS AG (UBS) said Tuesday that it lost 11.5 billion Swiss francs ($10.9 billion), as the battered financial giant absorbed $19.5 billion in mortgage and related write-downs. The bank had warned of the write-downs in early April. The losses will lead the firm to shed 7 percent of its workforce, or 2,600 positions, during the rest of this year, it said in a press statement Tuesday; a total of 5,900 jobs will be shed by mid-2009, it said. The losses at UBS add to mounting losses at U.S.-based investment banks, with Morgan Stanley (MS) and Lehman Brothers (LEH) allegedly set to push their latest round of layoffs, as Wall Street struggles to adjust in the face of ongoing market difficulties. The Swiss bank also said that it will sell a $15 billion of portfolio of subprime and Alt A assets to BlackRock Inc. (BLK) in a move designed to reduce its overall exposure to increasingly troubled U.S. mortgages. UBS said it has reduced its net exposure to subprime and related mortgages by more than 60 percent since the third quarter of 2007 -- although its worth noting that much of that exposure has simply been written off. It's not clear exactly who will service the assets in question -- UBS CEO Marcel Rohner said only that the mortgage assets would be placed with a new distressed asset fund managed by BlackRock -- but sources have suggested to HW that it's possible that the portfolio may end up with Calabasas-based PennyMac, a firm backed by BlackRock and other major investors, and headed up by former Countrywide exec Stanford Kurland. Calls to PennyMac for comment were not returned, but it's as of yet unclear if the newly-founded distressed mortgage asset specialist has yet staffed up to the point where it can manage a $15 billion portfolio. The BlackRock acquisition, however, likely underscores a growing need for investors to have a special servicer that can scale to their specific needs and requirements. Two such servicers have moved aggressively to position themselves in this emerging market recently, including Phoenix-based Marix Servicing, LLC and Plano, Texas-based Acqura Loan Services; it's likely others will look to move into the space aggressively as the number of investors buying distressed mortgages grows over the next few months, sources told HW. Disclosure: The author held no positions UBS when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.