The venerable Swiss bank, UBS, has been one of the hardest hit in the sub-prime mortgage crisis. The bank has written down $38 billion in assets, while showing a loss of more than $24 billion in the last three quarters. Rumors continue to swirl on Wall Street about the health of the firm. From an article by Stephanie Baker-Said and Elena Logutenkova on Bloomberg:
“The bank still has $45 billion of exposure to risky mortgage-related securities on its books, more than UBS’s total equity at the end of March. From mid-2005 to mid-2007, UBS’s balance sheet ballooned 21 percent to 2.54 trillion francs. At the end of last year, UBS was the most-leveraged major bank in the world, with assets amounting to 53 times its total equity.”
And the rumor floating around Wall Street is that they have still more undisclosed exposure. If housing continues to crumble and/or the credit crisis spreads robustly into other forms of debt, UBS is toast. They’re certainly too big to fail and there would surely be some kind of organized bailout, but the risk to UBS is very, very real.
See also: Is Lehman on the Ropes?