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I can't understand how UBS can incur more writedowns than US banks?
Are US banks hiding the true extent of their losses? After the BS incident, i believe the game is no longer "Mark to Market" or even "Mark to Model", but now it is "Mark to Bluff".
UBS and the case of the disappearing Alt-As
Are US banks hiding the true extent of their losses? After the BS incident, i believe the game is no longer "Mark to Market" or even "Mark to Model", but now it is "Mark to Bluff".
UBS and the case of the disappearing Alt-As
Remember that elusive rumour about UBS flogging its Alt-A portfolio. As the story bounced around the markets in March, UBS had supposedly sold more or less the entirety of its Alt-A portfolio to bond investor Pimco. The scary part was that, according to the whispers, the portfolio had been sold at 70 cents on the dollar, well below where it was being valued only a few weeks before.
The first glimpse at how UBS fared in the first quarter suggests that something did indeed happen within its Alt-A book. Subprime-related positions were reduced from $27.6bn to $15bn, a cut of about 55 per cent which could easily have come through straight writedowns. But Alt-A fell from $26.6bn to just $16bn, a 40 per cent drop. As the statement says:
These developments are the result of asset disposals as well as the effects of further writedowns.
With $19bn in total writedowns, it’s fair to say the bulk of the reduction came from the latter rather than the former. Assuming that the subprime writedown totalled close to the full $12.6bn, that leaves another $6.4bn to play with. How much of that could conceivably have hit Alt-A? We haven’t seen more than token efforts to write down banks’ Alt-A portfolios thus far - Lehman Brothers, for example, actually increased its “prime and Alt-A” holdings from the end of November to the end of February. Deutsche Bank nevertheless on Tuesday ominously suggested that alt-A, among other things, might be the next shoe to drop.
The first glimpse at how UBS fared in the first quarter suggests that something did indeed happen within its Alt-A book. Subprime-related positions were reduced from $27.6bn to $15bn, a cut of about 55 per cent which could easily have come through straight writedowns. But Alt-A fell from $26.6bn to just $16bn, a 40 per cent drop. As the statement says:
These developments are the result of asset disposals as well as the effects of further writedowns.
With $19bn in total writedowns, it’s fair to say the bulk of the reduction came from the latter rather than the former. Assuming that the subprime writedown totalled close to the full $12.6bn, that leaves another $6.4bn to play with. How much of that could conceivably have hit Alt-A? We haven’t seen more than token efforts to write down banks’ Alt-A portfolios thus far - Lehman Brothers, for example, actually increased its “prime and Alt-A” holdings from the end of November to the end of February. Deutsche Bank nevertheless on Tuesday ominously suggested that alt-A, among other things, might be the next shoe to drop.
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