Investment bank UBS posted a loss of between CHF 600m and CHF 800m (£334.4m) for the third quarter of 2007 yesterday, as it felt the impact of the credit crunch.
The loss, the bank's first quarterly loss for nine years, came as it was forced to show negative revenues of CHF 4bn in its fixed-income business.
'When most mortgage-backed securities positions were set up there were offsetting positions in place, designed to mitigate risk in normal market conditions. However, the deterioration in the US sub prime residential mortgage-backed securities market, especially in August, was more sudden and more severe than in recent history, and markets became illiquid,' said UBS in a statement.
The bank added: 'This led to substantial valuation losses, including in securities with high credit ratings. Management action has been taken to make certain these positions are appropriately valued and risk managed.'
The Swiss group also revealed that it had been forced to mark-to-model certain securities as a result of markets freezing up. The bank said it had taken a cautious view on its valuations and was comfortable holding the securities at the calculated valuations.
UBS is the first European investment bank to reveal the aftermath of the credit crisis. A number of US banks have already reported Q3 numbers and taken hundreds of millions of pounds in write downs.
The Q3 banking numbers have been keenly watched by markets, with investors and analysts looking for information on the extent of the sub-prime crisis and trying to unravel the valuation models used to value securities when markets are locked up.
Further reading:
reader comments