Sub-prime crisis in Singapore

January 12, 2008
Singapore Democrats

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UBS still uncertain on sub-prime effect

RTE Business
11 Jan 08
http://www.rte.ie/business/2008/0111/ubs.html

Swiss bank UBS has said it cannot predict the final impact of the US sub-prime mortgage crisis.

It said a new capital injection would strengthen its position as it called on shareholders to support planned investments from Asia and the Middle East.

UBS’s made the appeal in a letter to shareholders released this morning. It came after the New York Times reported that US bank Merrill Lynch was expected to suffer $15 billion in losses stemming from soured mortgage investments.

The Swiss bank is braced for what looks set to be a stormy shareholder meeting on February 27 when it will seek approval for a capital increase, resulting in the sale of a 9% stake to the Singapore government and around 1.5% to an unidentified Middle East investor.

UBS said it had decided against undertaking a rights issue to raise capital on the grounds of cost, complication and time.

The Swiss bank has been one of the biggest casualties of the collapse in the US sub-prime mortgage market, which resulted in billions of dollars in writedowns by banks in the value of their securities portfolios. In December, UBS announced a new $10 billion writedown on its sub-prime related exposures, which came on top of an earlier charge of $4.4 billion.

“We cannot, at this time, accurately predict the future development of US residential mortgage markets and therefore the ultimate impact on our positions in sub-prime mortgage related securities,” the letter said.

Last month, the Government of Singapore Investment Corporation (GIC) and a Middle East investor pumped $11.7 billion of fresh capital into UBS by agreeing to subscribe to a mandatory convertible bond. UBS said it was confident its capital position would now remain strong even if the US housing market continued to deteriorate.

Merrill mortage losses bigger than expected

Earth Times, UK
11 Jan 08 
http://www.earthtimes.org/articles/show/172225.html

US investment bank Merrill Lynch is expected to write down 15 billion dollars in losses from the credit crunch in the United States, almost twice its original loss estimate, The New York Times reported Friday.

The expected losses have prompted the bank to seek some 4 billion dollars in additional capital, the newspaper said. The bank is expected to announce the loss when it reports its earnings on Thursday.

Analysts had expected Merrill Lynch to take a 12-billion-dollar hit over bad mortgage investments. The bank had an 8.4-billion-dollar write-down in the third quarter of 2007.

Merrill may write down $15 billionCNN Money.com
11 Jan 08
http://money.cnn.com/2008/01/11/news/companies/merrill_writedown/

Broker expected to take staggering loss on bad mortgage bets when it posts results next week, paper reports.

Merrill Lynch is expected to report a bigger-than-expected $15 billion writedown when it reports its quarterly results next week, according to a report in The New York Times.

Many Wall Street analysts had anticipated that Merrill would take a $12 billion writedown due to mortgage-related losses when it reports results next Wednesday. Right now Merrill is expected to post a steep loss in the fourth quarter.

As a result of the deep loss, the nation’s largest broker is looking to raise capital from an outside investor, the newspaper said, citing people who had been briefed on the matter.

Sources told the Times that the company was in talks with overseas investors in Asia and the Middle East as well American private equity firms in an effort to raise $4 billion.

This would not be the first time Merrill looked to outside investors for help. In December the company announced it had received at least $4.4 billion from Singapore’s state-run Temasek Holdings.

Merrill Lynch shares finished 3 percent higher in Thursday trade on the New York Stock Exchange.