February 18, 2009 – 8:22 am

2009-02-18 –Guilty:

UBS’ income tax evasion scheme is coming to a head. The bank aided wealthy Americans in evading income taxes and is now rolling over on those same clients, closing their accounts and ratting them out to the IRS.

UBS, the largest bank in Switzerland, agreed on Wednesday to divulge the names of well-heeled Americans whom the authorities suspect of using offshore accounts at the bank to evade taxes. The bank admitted conspiring to defraud the Internal Revenue Service and agreed to pay $780 million to settle a sweeping federal investigation into its activities.

A sweet heart deal, actually. To a bank that has already written down $54B, $780M is a hiccup! No one goes to jail, all the insiders keep their money and the clients get a visit from the IRS.

Martha Stewart went to jail for saving $50,000 on an insider tip. What about the crooks at these banks?


2009-02-11 –Q4 (2008) Earnings:

UBS was hit hard in its fourth quarter and the bank is now staggering toward nationalization. Unfortunately, a bigger hit will be on the nation’s taxpayers when the Goliath finally falls.

The bank’s crafty accounting allowed it to deny any meaningful write-downs and it’s clearly lost some respect.  The previously-announced $60B bailout was scaled back to $40B in the quarter, and this will lower the total for Cash Raised Gov, to roughly $40.0B from $59.2B, giving UBS a total of $80B cash raised before adding the $6B raised this latest quarter.

Cash raising is becoming a cottage industry in itself. We have to wait for the 10-K to get the level 3 number, but we can estimate it using Q3 and adding the tidy $15.8B UBS moved from its banking book to its trading book. The bank added $1.38B to its loan loss reserves.

Here’s the tally thus far:

  1. Write-Downs/Charge-Offs: $50.1B + $4.4B = $54.5B
  2. Cash Raised Non Gov: $41.5B + $6.0B = $47.5B
  3. Cash Raised Gov: $40.0B
  4. Level III assets: $63.42B + $15.8B = $79.22B
  5. Loan Loss Reserves: >$7.38B

We now sum all the distresses to get UBS’ colossal Misery Index of $228.6B.

2008-11-16- Tax Evasion:

UBS must badly need American bail out bucks. They sure do seem pliable to roll over on their depositors for the sake of the IRS.

UBS clients have been receiving calls and letters telling them that their Swiss accounts will soon be liquidated. Those who have concealed funds from the IRS have two basic choices: They can take new and potentially difficult steps to hide the money, heightening their risk of being caught and punished severely, or they can come clean, lawyers say.

When it came to saving itself or preserving the integrity of its clients’ accounts, the letters started going out.

2008-11-05 –Q3 Earnings:

It’s official. UBS is on life support and would have imploded under the weight of its own debt, had not the working stiffs bailed out the beleaguered beast. The write-downs of $4.4B are mild by this monster’s standards, but the $60B of capital raised is staggering by any standards. Level 3 assets have increased by just over a billion dollars as well.

Here’s the tally thus far:

  1. Write-Downs/Charge-Offs: $50.1B + $4.4B = $54.5B
  2. Cash Raised Non Gov: $41.5B
  3. Cash Raised Gov: $59.2B
  4. Level III assets:            $73.7B<—-10 Q
  5. Loan Loss Reserves: > $6.0B

We now sum all the distresses to get UBS’ colossal Misery Index of $224.6B.


2008-11-12 –UBS Under Swiss TARP:

UBS crawled under the Swiss version of TARP today, the bank will get a bailout of $60 billion.  The figure eclipses all of the write-downs UBS has taken since the credit bubble burst in July of 2007.

The Swiss National Bank and UBS have reached an agreement to transfer up to $60 billion of currently illiquid securities and other assets from UBS’s balance sheet to a separate fund entity. UBS will capitalize the fund with equity of up to $6 billion.

Six to Sixty, that’s not a bad deal, but just try to get one for yourself. Taxpayers worldwide are the same, fodder for the banking elites. When it comes we’ll add the $60 big ones to the cash raised category for UBS.

2008-08-12-Q2 Earnings:

UBS’s disastrous second quarter was pre-ordained during the credit bubble. Let this be another lesson to the banks. This is what happens when a company loses all restraint and sells mortgages like a drunken sailor doubling every bet in a casino. In the second quarter, the bank got hit by funds withdrawals and Auction Rate Securities rebates of $900M.

Here’s the tally thus far:
  1. Write-Downs/Charge-Offs: $45.17B + $5.1B = $50.27B
  2. Cash Raised: $41.5B
  3. Level III assets: $$62.38B <—-10 Q
  4. Loan Loss Reserves: >$900 M
  5. ARS-Buyback         : $19.5B

We now sum all the distresses to get UBS’s colossal Misery Index of $174.55B.

2008-08-06 –UBS Settles:

UBS AG, will buy back $18.6B worth of it’s peddled junk and pay a fine $150 M for dumping without a license. It’s the kinda thing that happens every day and you don’t feel bad about unless you get caught and UBS got caught.

UBS AG, Switzerland’s biggest bank, agreed to pay $150 million in fines and begin buying back $18.6 billion in failed auction-rate securities, the largest settlement in a U.S. probe into whether banks stuck clients with hard-to-sell bonds.

UBS will purchase $8.3 billion of the securities from its clients beginning on Oct. 31 under a settlement with New York State Attorney General Andrew Cuomo, the Securities and Exchange Commission, and a group of other state regulators, according to terms of the settlement announced today. The bank must also help its institutional clients sell an additional $10.3 billion in securities, and may have to buy back the bonds if they fail to find a market, Cuomo said.

If UBS wrties down the $18.6 B it will take the write-downs due to forced buy back to 19.5 B which equals the entire Pain total for JP Morgan.

2008-06-01 – Rights and Wrongs:

The Great Unraveling continues for UBS as it raises more cash, but confesses to yet more risk.

2008-05-22 – Hard Hit:

Hard hit and ailing UBS is in full scale rescue mode. The bank has raised $15 billion in a rights issue. The $15 billion was announced on April fools and now we addit  to our cash raised tally. Additionally UBS sold $22 billion worth of subprime and alt-A backed assets to a SIV led by Black Rock for $15 billion. They haven’t written it down yet but we can add and even subtract and when UBS eventually does face the music it will be to the tune of $7 billion.

  1. $38.17B + $7.0B = $45.17B
  2. $11.5B +  $15.0B    = $41.5B

Hey if the writedowns can stop here they are almost running a profit.

2008-05-21 – Write Downs Count of a Different Sort:

We have been keeping a running tally of write downs and other credit related distress taken by the major banks since 2007. But here come a write down count of a different sort, how much in writedowns and credit losses firms have written off per wholesale banking employee.

UBS – $37bn, 22,000, $1,681,818 per employee

But this ratio is subject to shoot up as the number of  UBS employees heads down.

2008-05-14 – Cover Up:

A former UBS banker has been indicted for enabling his billionaire client evade taxes. It’s not clear how deep the bank will be dragged down with him, but UBS finds itself again In the thick smoke of a criminal investigation, and you know the saying about smoke and fire going together.

The Feds opened a window onto the world of private banking at UBS, Switzerland’s biggest bank, by unsealing an indictment against a former UBS banker for allegedly helping one of the world’s richest men evade taxes. In a one-count conspiracy indictment, Bradley Birkenfeld is accused of helping California real estate magnate Igor Olenicoff evade taxes on $200 million held in Swiss and Liechtenstein bank accounts.

2008-05-05 – Cutting Bait:

In addition to the well documented write downs and losses to the US subprime market now UBS is cutting a tenth of its work force and gained approval to raise raise 15 ($14.2) billion francs in a rights offer after receiving 13 ($12.3) billion francs from investors in Singapore and the Middle East in March. That’s $38 billion written down to $12.3 billion raised plus $14.2 billion set to be raised or $26.5 billion total. At this rate cash raising may be most profitable business the bank has.

2008-04-11 – Break Up:

UBS is coming apart at its seams. The $38 billion in write-downs and 25 billion francs of losses have taken their toll on more than just the balance sheet. But what would you expect?

2008-04-01-Cash and Write Downs going Up:

UBS doubled it’s writedown total revealing another $19 billion  subprime related write downs. In response the bank hurriedly attempts to raise a CHF15 billion cash cushion to absorb the blow.  You can expect to see the $15.1 billion cash raised added tally soon.

Swiss banking giant UBS said Tuesday it will have to raise around 15 billion Swiss francs ($15.1 billion) in a rights issue to shore up its capital base after announcing new write-downs of around $19 billion.

The latest write-down came in at the top end of expectations and exceeded the $18.4 billion UBS took for the whole of 2007. In the process UBS doubles down our write-down tally for them.

So, we double up UBS’s  write-downs tally:

  1. Write-Downs/Charge-Offs: $19.17B + $19.0B = $38.17B
  2. Cash Raised                       : $11.5B   +     ?        = $11.5B

2008-03-24-Vote on It:

UBS is about to vote on whether to seek a $10 B capital infusion (also known to existing shareholders as a “share dilution”).

2008-03-05– Rumors:

From FT Alphaville comes “Those UBS Asset Sale Rumors“:

Specifically, $20bn of Alt-A mortgage securities to be sold to bond giant PIMCO. …

The Alt-A MBS have reportedly been sold at 70c on the dollar, which would be a massive loss, since UBS valued what looks to be the same instruments at 96c on the dollar just three weeks ago in their 2007 results.

This is rumor-level stuff, but of course, we figured this sort of dealing was going on quietly. If indeed the new level was .7, then there could be additional $5B+ of write-downs coming from UBS.

2008-02-20 Over Leveraged:

UBS may have another little hicup of a write-down due to it’s leveraged loans binge in 2007. Oppenheimer analyst Meredith Whitney estimates the bank has $11.4 billion in exposure as Q4 2007. The only question is how and when they will expense it.

*****************************************************End Fiscal 2007***********

2008-02-14– Q4 (2007) Earnings Report:

UBS has been caught low-balling its subprime related write-downs/exposure again. After first giving guidance of $1.7B for fiscal fourth quarter, the bank revised that number upward to $14.0B and eventually recorded total Q4 subprime related write-downs of $13.7B. Accompanying the write-down was a fourth quarter loss of $11.28 billion, and an annual loss which was the bank’s first ever.

UBS gave the break down for the fourth quarter write-downs as follows:

RMBS($10.8B) + Alt-A($2.0B) + CDS($871M) = $13.67B

The figure above is in line with the guidance of $14.0B previously issued. The bank also recorded losses of about $500 million and $200 million on commercial real estate loans for leveraged buyouts respectively.

But it was in the area of remaining subprime exposures that the bank was up to it’s old tricks again. After first giving a figure of $35.5B in remaining subprime exposure (according to Deutsche Bank data ca. 2008-01-10) the

‘Swiss bank UBS shocked markets with tens of billions of dollars in new exposure to risky U.S. mortgages, leveraged finance and complex securities, dramatically raising its vulnerability to the credit crisis.’

The current exposure to subprime mortgage risks is given as:

Alt-A($26.6B) + $11.4B(LBO) + US-Ref ($11.2B) + subprime($27.6B) + (more unknown).

UBS said it holds:

$26.6 billion in Alt-A mortgage (non-subprime) products; the bulk are triple-A rated; $3.8 billion in subprime reference-linked notes; and $2.9 billion to monoline insurers on RMBS CDOs, among the securities hardest hit by the subprime shakeout.’

Expectedly the stock did not react well. David Williams remarked:

‘”They are in a sorry predicament. They have by far the largest exposure of any European bank and they cannot just trade out of it. The crisis at UBS will last as long as the credit crisis lasts.” ‘

That frustration is attributable to dealing with banks who just will not come clean until they absolutely have to.

Meanwhile we tally up UBS’s write-downs so far:

  1. Write-Downs/Charge-Offs: $5.5B + $13.67B = $19.17B
  2. Capital Raised                    : $0.0 +   $11.5B = $11.5B

The UBS writedown total  $19.17B is  growing fast.

2008-02-04 – Regular Trouble:

UBS finds itself in additional hot water with regulators:

Federal criminal prosecutors in New York are investigating whether UBS AG misled investors by booking inflated prices of mortgage bonds it held despite knowledge that the valuations had dropped, according to people familiar with the matter.

Other regulators led by the SEC are examining whether financial firms should have told investors earlier about the declining value of such securities and how they priced them on their books, people close to the matter say.

In its investigations, the SEC also is delving into whether Wall Street firms placed higher values on securities they own than those they placed in customer holdings, the people say. The SEC previously has said it has opened roughly three dozen investigations tied to the downturn of the subprime market, which primarily is tied to borrowers with poor credit histories.

In the SEC’s UBS investigation, the agency is examining, among other things, a situation last year in which a trader at a now-defunct hedge fund of UBS’s Dillon Read unit was confronted and then ousted after he valued mortgage securities at prices below the value assigned to the same securities elsewhere at UBS.

Yes, we would say that is a serious mode of butt-covering going on at the money center banks: lie about values, and prevent price discovery. Time will tell how guilty UBS is/was.

Initial Writeup, Jan. 30 2008:

The latest, per Bloomberg:

UBS AG posted the biggest loss ever by a bank after raising fourth-quarter writedowns on securities infected by U.S. subprime mortgages to $14 billion.

The bank increased markdowns directly linked to the subprime market to about $12 billion from the $10 billion it forecast in December and said an additional $2 billion of writedowns are for other U.S. residential mortgage securities. “Weak” debt-trading revenue and the sale of securities at a loss to cut risky assets contributed to the results, UBS said.

“Value declines have extended beyond just subprime-related exposures, to new areas, for which we do not yet have disclosure on exposure size,” Jeremy Sigee, an analyst at Citigroup, said in a note to clients. “The recently bolstered capital base remains vulnerable to further erosion.”

And this part must not exactly instill confidence for UBS’s clients:

Ospel and Marcel Rohner, who replaced CEO Wuffli in July, told analysts and investors in London on Dec. 11 that record losses were a result of positions created “by a small group of people in one team.” They also ruled out separating the investment bank from the wealth-management unit and instead said UBS will focus on bringing the two businesses closer together, while cutting assets and risk-taking of the securities division.

Hmm… “don’t worry, the losses were isolated — to a unit we plan on bringing closer to the one your money is in.”

UBS originally write down $500 million worth in Q2-07, then slightly over $5B in Q3 (according to Deutsche Bank data ca. 2008-01-10). Q4 guidance on writedowns was about $1.7B (until the above came out).

It is believed remaining subprime exposure is to the tune of approximately $18B in CDOs and $16.8B in direct RMBS (this data also from Deutsche Bank). It is unknown (to us) what their exposure is to other sorts of shaky mortgage loans (Alt-A, seconds, HELOCs, Pay Options, etc.)

In addition to write downs UBS raised $11.5 billion in cash by selling shares to investors in Singapore.

The Southeast Asian island-state of Singapore will hold its 9 percent stake through the Government of Singapore Investment Corporation (GIC), a second major injection of sovereign wealth fund cash into a major bank along the lines of the Abu Dhabi Investment Authority’s purchase of its $7.5 billion stake in Citigroup on November 27.

“It’s a developing trend. Asian and Middle Eastern sovereign investors are cash rich and have a longer time horizon than the average market investor,” said Omar Fall, analyst at ABN AMRO.

A further stake of about 1.5 percent is going to an unnamed Middle East investor, and the two investments will raise 13 billion Swiss francs ($11.5 billion) of fresh capital. Oman’s State General Reserve Fund denied suggestions that it was the investor in question.

Here are the 2007 write-downs for UBS so far:

  • Q2 2007 – –  $500M in Q2 of 2007
  • Q3 2007 —   $5B

By the old math that’s $5.5B big ones written down and $11.5 billion raised up so far in 2007.

  1. Write-Downs/Charge-Offs: $5.0B + $0.5B = $5.5B
  2. Capital Raised                    : $11.5B

Great start UBS!

  1. 2 Responses to “UBS – $228.6B”

  2. A sorry story. No help to expect from the government.

    In the future you have to control your greed and try to behave as decent people.

    By René Cohrt on Feb 19, 2008

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