UBS announced today that it will write off another $10 billion tied to its U.S. mortgage-related holdings, leading to a fourth quarter loss and potentially an overall loss for 2007.
“Conditions in the U.S mortgage and housing markets have continued to deteriorate, and we have updated our loss assumptions to the levels implied by the current distressed market for mortgage securities,” the company’s chief executive, Marcel Rohner, said in a statement.
“In the last several quarters, continued speculation about the ultimate value of our subprime holdings – which remains unknowable – has been distracting,” Rohner added.
“These write-downs will create maximum clarity on this issue and will have the effect of substantially eliminating speculation.”
The latest writedowns, which were based on the value of exposure at the end of November, involved the holdings of risky “super senior debt” and collateralized debt obligations, or CDOs, the bank said.
On October 30, UBS said that it had $16.8 billion invested directly in residential mortgage-backed securities, $1.8 billion of CDOs, and $20.2 billion of super senior securities as of the end of the third quarter.
At that time, and up until mid-November, the banking giant had predicted fourth-quarter profitability despite its hefty subprime mortgage holdings.
But it wasn’t all bad news, as UBS announced that Singapore, through its Government of Singapore Investment Corporation (GIC), is taking a 9 percent stake in the company, a $9.75 billion investment.
“GIC is now the single largest investor in UBS and this is the largest investment GIC has made in any company,” said Tony Tan, deputy chairman of GIC, during a news conference in Singapore.
Another unnamed Middle Eastern investor has claimed a 1.5 percent stake in the company, boosting capital for the ailing Swiss bank.
UBS also plans to replace its cash dividend with a stock dividend, and looks to sell 36.4 million treasury shares.
Shares of UBS, which fell initially in morning trading, climbed $1.02, or 2.02%, to $51.50 as investors began to consider that the worst could be over.
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