Writedown will not impact India: UBS

Swiss banking behemoth UBS yesterday announced that its latest subprime-linked writedown of about $19 billion will have no impact on its operations in India, which it claimed to be an important market in Asia.

"I don't see any link between what is announced today in terms of a fresh writedown of $19 billion and our operations in India, which is a major market for UBS in Asia," a UBS executive in Zurich told Business Standard.

UBS is completely focused on India and especially on gaining a foothold in the wealth management space. The Swiss bank has operation centers in Hyderabad and is entering into projects in Mumbai, the executive added. The latest subprime calamity struck deep wounds on UBS' management, forcing its chairman Marcel Ospel to step down. He will be succeeded by Peter Kurer, a long-serving UBS banker.

Coming close on the heels of a $18.4 billion writedown last year, the latest blow has caused a huge loss of about $12 billion (Sfr 12 billion) in the first quarter this year, according to a statement emailed by the UBS to reporters.

Faced with the worst losses since its creation ten years ago, UBS has now been forced to seek $15 billion in a rights offer so as to replenish its capital base.

The Swiss bank raised about $13 billion from investors in Singapore and West Asia last year. UBS is working hard to clean up and the capital increase will put it back on a solid foundation, said analysts.

Deutsche Bank, which is Europe's biggest investment bank by revenue, also expects to suffer a $3.9 billion loss in the first quarter following writedowns on leveraged loans, commercial real estate and residential mortgage-backed securities.

Leading American and European banks have suffered credit losses and writdowns worth $230 billion following the unabated subprime meltdown.

"I don't have a crystal ball to suggest that the latest subprime writedown is the last major loss," the UBS executive told Business Standard, arguing that it is difficult to predict anything about the current crisis.

Losses from the subprime mortgage crisis are expected to go well beyond $400 billion, said analysts in Geneva, arguing that the global financial system is facing the most severe systemic crisis.

The shares of UBS rose by 1.82 Sfr to 31.42 Sfr after the bank proposed an ordinary capital increase through a rights issue to raise about $15 billion, analysts said.