UBS Predicts $600 Billion Loss From Credit Crunch
On Friday it was reported that analysts from UBS AG, Europe’s second largest bank, were predicting total industry losses from the ongoing credit crunch would reach $600 billion, with banks and brokers accounting for $350 billion of these losses. MarketWatch’s Steve Goldstein said earlier today that financial firms have been forced to write-down approximately $160 billion since the crisis began last summer. Goldstein wrote that, according to UBS strategist Geraud Charpin’s note to clients:
Corporate collateralized debt obligation have been relatively spared because defaults are low and CDOs are not mark to market, but risks remain, particularly as monoline insurers are heavily referenced in CDO baskets.
In today’s “Daily Briefing,” Fortune’s Colin Barr noted that:
The comment comes a day after insurance giant AIG (AIG) took an $11 billion hit on its portfolio of credit default swaps and government-sponsored mortgage lender Freddie Mac (FRE) took $3.1 billion in writedowns on its credit guarantee and derivatives holdings. UBS itself was hit with a $14 billion writedown on mortgage-related securities earlier this month…
“Leveraged risk positions are a cancer in this market, wrote UBS analyst Geraud Charpin, “and the sooner it is treated the better.”
According to CNN Money, the world’s largest manager of private wealth assets is concerned most underestimate the impact of the credit crunch:
The bank also noted that the crisis’ impact on the real economy is likely to be stronger than currently expected.
‘To cut a long story short, if we had a ‘rhetoric index’ measuring the tone of messages from our economics team, it would have been dropping since last September,’ the study said.
UBS said the downward trend has accelerated over the last few months with both US and EU data becoming increasingly worrisome.
‘At this stage, therefore, we have to recognise the risk that the economy will suffer more damage than what consensus suggests,’ UBS said.
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