UBS, already one of the biggest victims of the US sub-prime crisis, has been forced to write off another $19bn (£9.6bn) from the value of its mortgage assets, forcing its under-fire chairman to step down.
The Swiss bank said today it was seeking fresh capital through a rights issue, after admitting that its losses from so-called "toxic debts" -- securities underpinned by US home loans whose value has plunged in recent months - had doubled. Chairman Marcel Ospel, who had previously fought off calls for his resignation, will step down at its AGM later this month.
The latest write-down was caused by another drop in the value of the company's holdings in securities backed by US mortgages, and doubles its overall sub-prime losses. It pushed the company into a loss of SFr12bn (£6bn) for the first quarter of 2008.
The write-down is larger than City experts had expected, and takes UBS's total sub-prime losses to more than £18bn. It sparked optimism that the turmoil in the financial markets may finally be approaching a turning point, as banks had previously been criticised for not admitting the full scale of the damage.
UBS's shares, which have fallen 44% this year, jumped more than 12% today. The news also lifted banking stocks in London, where they dominated the list of biggest risers on the FTSE 100. Alliance & Leicester gained 6.5%, RBS was up 7%, Barclays was up 5.9% and HBOS 7.9%.
UBS said it would issue new shares in an attempt to raise Sfr15bn, and is also setting up a new unit to hold "certain currently illiquid US real estate assets".
"With these measures we have created the basis to weather one of the most difficult periods in the history of the industry," said Marcel Rohner, chief executive.
Speaking on a conference call, Ospel said he took the decision to resign last night.
UBS's admission was swiftly followed by a $3.9bn write-down from Deutsche Bank today, and the two announcements appeared to give investors confidence that the financial sector is finally addressing the full extent of its sub-prime losses.
Martin Slaney, head of derivatives at GFT Global Markets, said the banking sector share rises could show that the bear market is reaching a bottom.
"Investors seem to be saying that the worst is over. This is a very significant move for the markets – if it is sustained," said Slaney.
"It appears that the rights issue and managerial restructuring announced along side the write-downs by UBS will keep their major shareholders content for now," he added.
The collapse of the US sub-prime market has prompted a swathe of multibillion pound write-downs as the banks found themselves holding assets for which there was no longer any demand. Last year, UBS made its first annual loss ever after posting write-downs of over £9.2bn.
The Swiss bank said today it was seeking fresh capital through a rights issue, after admitting that its losses from so-called "toxic debts" -- securities underpinned by US home loans whose value has plunged in recent months - had doubled. Chairman Marcel Ospel, who had previously fought off calls for his resignation, will step down at its AGM later this month.
The latest write-down was caused by another drop in the value of the company's holdings in securities backed by US mortgages, and doubles its overall sub-prime losses. It pushed the company into a loss of SFr12bn (£6bn) for the first quarter of 2008.
The write-down is larger than City experts had expected, and takes UBS's total sub-prime losses to more than £18bn. It sparked optimism that the turmoil in the financial markets may finally be approaching a turning point, as banks had previously been criticised for not admitting the full scale of the damage.
UBS's shares, which have fallen 44% this year, jumped more than 12% today. The news also lifted banking stocks in London, where they dominated the list of biggest risers on the FTSE 100. Alliance & Leicester gained 6.5%, RBS was up 7%, Barclays was up 5.9% and HBOS 7.9%.
UBS said it would issue new shares in an attempt to raise Sfr15bn, and is also setting up a new unit to hold "certain currently illiquid US real estate assets".
"With these measures we have created the basis to weather one of the most difficult periods in the history of the industry," said Marcel Rohner, chief executive.
Speaking on a conference call, Ospel said he took the decision to resign last night.
UBS's admission was swiftly followed by a $3.9bn write-down from Deutsche Bank today, and the two announcements appeared to give investors confidence that the financial sector is finally addressing the full extent of its sub-prime losses.
Martin Slaney, head of derivatives at GFT Global Markets, said the banking sector share rises could show that the bear market is reaching a bottom.
"Investors seem to be saying that the worst is over. This is a very significant move for the markets – if it is sustained," said Slaney.
"It appears that the rights issue and managerial restructuring announced along side the write-downs by UBS will keep their major shareholders content for now," he added.
The collapse of the US sub-prime market has prompted a swathe of multibillion pound write-downs as the banks found themselves holding assets for which there was no longer any demand. Last year, UBS made its first annual loss ever after posting write-downs of over £9.2bn.
This article is from The Guardian
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