Tuesday, February 10, 2009

You and Us UBS, and Another $7 Billion Loss

Sure $7 billion might sound like huge loss, but let's put things in perspective, shall we?  UBS's loss actually narrowed from the fourth quarter of last year, so its fourth quarter results were actually fabulous in comparison.  The Swiss banking giant announced that it would cut another 2,000 jobs.  Total losses for the entire year amounted to 19.7 billion francs ($17 billion.)  As I noted in my prior post about Wall Street bonuses, UBS agreed to sharply reduce bonus payments as part of an agreement with Swiss regulators, doling out 1.16 billion francs compared with 7.91 billion francs in 2007.  Although the investment bankers at UBS were clearly unhappy with this meager bonus pool, it's safe to say that any company that isn't a systemic threat to the world financial system doesn't get to pay out any bonuses after losing $17 billion in a year.
The largest hit to net profit came from a 4.2 billion franc charge related to the transfer of toxic assets to a so-called bad bank managed by the Swiss National Bank.  Congratulations to the Swiss citizens who are now stuck with any further losses from UBS's ill-timed leap into the high-risk world of CDOs.  A further 2.3 billion francs came from charges including write-downs on leveraged loans.  On the bright side, assets have stopped surging out of the wealth management unit and the bank is cautiously optimistic about its prospects in 2009.  In times like these, cautious optimism seems like a huge improvement over the blatantly obvious lies that spewed from investment bank management when the worst was supposedly over last march.    

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