UBS could face USD 300m loss from Lehman fall

17 September 2008

ZURICH — Swiss bank UBS AG said Tuesday that its losses would be limited to USD 300 million (CHF 336 million) as a result of the bankruptcy of US investment giant Lehman Brothers Holdings Inc.

UBS, reacting to a study that claimed Switzerland’s largest bank would lose over USD 4 billion, said its "direct and counterparty exposures to Lehman Brothers, net of hedges, are now substantially closed out".

The total cost of closing out exposures should not exceed USD 300 million, UBS said in a statement. Those losses would be smaller than the billions the bank has already written off on the US subprime crisis.

Bernstein Research predicted much higher loses in a note, basing its estimate on a set of criteria including "the lack of a tax shield at UBS".

In a later clarification, it said that at no point did it want to imply that UBS, crosstown rival Credit Suisse Group or Germany’s Deutsche Bank AG "are in danger of default or being ‘the next domino to fall.’"

Concerning UBS, it noted: "The bottom line is that we do not know what UBS exposure is. It is justifiable to say that the exposure is likely… much lower than our estimate."

UBS shares plunged for the second straight day Tuesday, dropping 17.3 percent to close at CHF 16.63 in Zurich amid declining shares for financial companies in general.

That followed a tumble of 14.8 percent Monday.

[AP / Expatica]