UBS profit warning

1 Oct 2007 By Simon Nixon

The Swiss bank used to be a byword for caution, until greedy investment bankers bamboozled the board into embracing greater risktaking. Those risks were badly handled. Shareholders are at least lucky the crunch hit before UBS s big push into leveraged loans yielded results.

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UBS has warned of a $4bn writedown in its third quarter results arising from losses on fixed income trading. The Swiss bank has also fired its chief financial officer and head of investment banking and announced 1,500 job cuts in its fixed income division. The move follows the closure earlier this year of Dillon Read Capital Management, an internal UBS hedge fund business headed by former head of investment banking John Costas. DRCM's trading positions were absorbed by UBS and have triggered substantial marktomarket losses in recent weeks.

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