UBS has announced another $10 billion writedown in sub-prime losses, prompting many to suspect that the fallout from the mortgage market is only just beginning.
After axing both its CEO and 1,500 staff members, UBS still appears to be reeling from the effects of the sub-prime crisis. The loss is the largest yet suffered by a European bank due to the sub-prime crisis.
“In response to continued deterioration in the US sub-prime mortgage securities market, partly driven by increased homeowner delinquencies but mainly fuelled by worsening market expectations of future developments, UBS has revised the assumptions and inputs used to value US sub-prime mortgage related positions.
“This will result in further writedowns of around $10 billion, primarily on CDO and ‘super senior’ holdings.
“In light of continued deterioration in the sub-prime market, valuations of UBS’s remaining sub-prime positions reflect the extreme loss projections implied by the prices achieved in the very limited number of observable market transactions in US sub-prime related securities and indices up to the end of November,” says UBS in a statement.