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Swiss investment bank UBS records first loss in almost a decade due to crisis in US sub-prime mortgage market

Swiss investment bank UBS is to record its first loss in almost a decade as a result of the crisis in the US sub-prime mortgage market.

In a statement today the wealth manager warned that it is likely to record an overall pre-tax loss of between 600 million and 800 million Swiss francs (£280 million and £334 million) for its third quarter to September 30th.

UBS said that the losses "mainly related to deteriorating conditions in the US sub-prime residential mortgage market".

The banking giant said it would have to write down losses totalling four billion Swiss francs (£1.67 billion) as a result of its exposure to bad investments in risky US home loans.

While all investment banks, bar Goldman Sachs, have seen their profits slump as a result of the collapse in the sub-prime market, UBS is the first one to report a loss.

Analysts say that UBS' announcement will add to fears that the downturn in the US housing sector could spread to the wider economy. Default levels have been rising in the country's sub-prime mortgage sector over recent months as a result of a series of interest-rate rises.

Investors fear that the world's banks could become increasingly reluctant to lend cash to companies and individual borrowers as a result of losses they have made due to exposure to bad debts in the sub-prime sector, which provides high interest home-loans to those on low incomes or with poor credit ratings.

UBS says that it now plans to cut 1,500 jobs and implement key management changes following its losses.

Commenting on the matter, UBS group chief executive Marcel Rohner said: "Our first quarterly loss in nine years is an unsatisfactory result, especially after such a strong first half.

But he insisted that the management shake-up and other changes put the investment bank on a sound future footing.

"Following these actions, UBS is in a strong position to continue to grow its client businesses," Mr Rohner stressed.