UBS Swiss Banking Follow Up

Well, I wasn't aware of it, but almost coincident with my last posting, UBS was getting ready to declare another major loss for the 4th Q of 2008.

I've been openly speculating for some time that the Swiss Banking industry is too big for the Swiss government to save. To be truthful, I haven't really bothered to put pencil to paper on that speculation to see if it is true, however, i saw some figures that were a little bit alarming last fall outlining the relative size of both.

Is there a country that is more dependent on its banking sector?

I'm not sure, both panama and singapore also have pretty signficant deep water port and of course the canal in the case of panama.

Liechtenstein, perhaps, however, to be honest I'm not even sure if the qualify as a country or just a monarchy that's been carved out of some other countries :)

Anyways, if they lose their bank secrecy I think the Switzerland brand takes a major hit, and private wealth will continue to drain out in droves. Here is the story that was released where they lost $6.9Billion dollars in on quarter. Ouch...that'll leave a mark....

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Feb. 10 (Bloomberg) -- UBS AG, Switzerland’s largest bank, reported a fourth-quarter loss of 8.1 billion Swiss francs ($6.9 billion) after writedowns related to the credit crisis.

The net loss compares with a deficit of 13 billion francs in the year-earlier period, Zurich-based UBS said in a statement today. The loss was wider than the 7.5 billion-franc median estimate of 11 analysts surveyed by Bloomberg.

For the full-year, UBS recorded a loss of 19.7 billion francs. Chairman Peter Kurer and Chief Executive Officer Marcel Rohner pledged to return UBS to profitability this year after receiving a $59.2 billion lifeline from the Swiss government to split off toxic assets.

They’re scaling back risk at the securities division, where most of the losses have occurred, and seeking to stem defections by private banking clients. The investment banking “franchise seemed to have gone down to the seventh circle of hell,” Dirk Hoffmann-Becking, an analyst at Sanford Bernstein & Co., said in a note to clients. “Growth expectations for the bank are muted.”

UBS has fallen 65 percent over the past 12 months in Swiss trading, cutting the market value to 37.8 billion francs. The 64- company Bloomberg Europe Banks and Financial Services Index declined 63 percent in the same period. Before today, the bank had announced 9,000 job cuts, exited parts of debt trading and commodities businesses and raised $32 billion from investors to offset record losses at the securities unit. Clients at UBS’s wealth management units removed more than 140 billion francs in the first nine months of 2008.

U.S. Tax Probe Financial institutions worldwide have amassed $1.09 trillion of losses and shed almost 270,000 jobs since the U.S. subprime mortgage market collapsed, data compiled by Bloomberg show.

The U.S., Britain, France and Germany are among nations that injected billions into banks to prevent a wider financial calamity following the September collapse of Lehman Brothers Holdings Inc. Deutsche Bank AG, Germany’s biggest bank, reported last week a record 4.8 billion-euro ($6.3 billion) net loss for the fourth quarter and its first annual deficit in more than 50 years.

Credit Suisse Group AG, the second-biggest Swiss bank, may say tomorrow its fourth-quarter loss amounted to 4.2 billion francs, according to the median estimate of 11 analysts. Kurer, 59, told investors in Zurich last month that the recovery of UBS’s reputation and a settlement of a probe into whether the bank helped 20,000 wealthy clients avoid American taxes are two priorities for this year. Raoul Weil, the former head of wealth management, was indicted on conspiracy charges in the U.S. tax case and stepped down in November. He was declared a fugitive from U.S. justice last month. Weil has denied allegations through his lawyer.

‘Biggest Challenge’

“The biggest challenge by far is fixing the reputational loss of the core wealth management business,” said Georg Kanders, an analyst at WestLB in Duesseldorf. “If they don’t fix that fast, the future looks very gloomy.”

A combination of asset outflows and falling margins in money-management businesses may lower profits by a third at the private bank and by about 40 percent in asset management this year, according to estimates by Morgan Stanley analysts Huw van Steenis and Carlos Egea.

At the investment bank, the management is caught between pressure from shareholders to cut costs and discontent among employees facing a reduction in bonuses, which may delay the unit’s turnaround, according to analysts. UBS said it cut the 2008 bonus pool for staff, excluding U.S. brokers, by more than 80 percent to less than 2 billion francs.

Keeping ‘Rainmakers’ “It would be surprising if the bank could hold on to key senior rainmakers in their core businesses after such a reduced payout,” Hoffmann-Becking said. “At a minimum we should see bankers going into nine-to-five mode.” The pretax profit goal of 4 billion francs, set last May by Jerker Johansson, the head of the securities unit, probably won’t be reached this year or even next, according to estimates from analysts including Citigroup Inc.’s Jeremy Sigee.

The fixed-income unit, which was responsible for most of the $48.6 billion in writedowns and losses from the credit crisis, needs further “radical change” to return to profitability, Jeff Mayer and Carsten Kengeter, the heads of the business, said in a Jan. 21 memo to employees.

Todd Morakis, who ran commodities, Sascha Prinz and David Sacco, co-heads of global rates, and credit head Chris Ryan will leave the bank, the memo said. Jon Bass, who headed fixed-income client management, left UBS to help BTIG LLC, an institutional broker, enter credit trading markets.