European banks write off billions
GENEVA - Two of Europe's largest banks, UBS and Deutsche Bank, said yesterday they are writing down billions more in bad investments, reflecting the unrelenting wave of woe from the US subprime crisis.
Banks and analysts agreed that threats to the industry persist, predicting massive job losses over the next 1 1/2 years and larger global banking losses from the US housing market slump.
UBS AG disclosed the surprise departure of its chairman and forecast losses and write-downs of approximately $19 billion in the first quarter. That puts its write-downs for the past nine months at $37.4 billion - the most reported by any bank so far.
Switzerland's largest bank also said it would post a first-quarter net loss of about $12.1 billion, seek about $15.1 billion in new capital, and create a new unit for its troubled US real estate assets. More jobs also will be cut.
Deutsche Bank, which has been less affected, said it now expects write-downs of about $4 billion in the first quarter because of "significantly more challenging" market conditions after the plunge in US housing prices, rising defaults, and the resulting credit crisis.
UBS stock rose sharply throughout the day, closing up more than 12 percent in Zurich. Traders and analysts said investors welcomed the capital hike and the departure of chairman Marcel Ospel as a chance for the bank to make a fresh start.
Deutsche Bank shares gained nearly 3.5 percent in Frankfurt.
Analysts were less convinced that the bad news was over.
UBS's disclosures were "a clear indication that we are not out of the woods yet in terms of the credit crisis," said Octavio Marenzi, head of financial consultancy Celent.
He predicted overall revenue in the US banking industry would shrink for the first time in more than 40 years. "This will inevitably lead to staff reductions, and we expect to see the US banking industry shed about 200,000 jobs in the coming 12 to 18 months," he said. 