Battered Swiss bank UBS AG (UBS)
faces what are expected to be further write-downs on its mortgage related positions when it reports its second quarter results, according to published report Tuesday morning. In the wake of fresh disclosures Monday morning by Lehman Brothers Holdings Inc. (LEH)
that the value of key mortgage and real-estate holdings had decreased substantially, analysts told the Wall Street Journal
that exposure at UBS to similar assets could lead the firm to post a quarterly loss.
News of fresh losses at UBS are arriving at what could be described as an inconvenient time; the bank is in the process of raising 15.97 billion Swiss francs ($15.67 billion) in a rights offering expected to be complete Friday.
In its prospectus for the rights offering, the financial giant pegged its exposure to U.S. subprime mortgages at $27.6 billion, net of hedges. Alt-A mortgage exposure stood at a similar $26.6 billion, as well. Those numbers came before UBS sold $15 billion of its subprime book of business to BlackRock Inc. (BLK)
in a fire-sale designed to reduce exposure to some of the riskiest mortgage assets.
Javier Lodeiro, Zurich-based analyst with German private bank Sal. Oppenheim, is quoted by the Journal as estimating that UBS will have to take write-downs worth several hundred million francs, a figure that he suggested in the report may rise further before the quarter closes June 30.
Disclosure: The author held no positions UBS, LEH or BLK when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.