UBS (NYSE: UBS), the big Swiss bank, will write-off another $19 billion in the first quarter, mostly real estate and related assets. The company's chairman will leave in the face of a huge first quarter loss and the bank will try to raise $15 billion. According to The Wall Street Journal:"UBS's latest move follows a capital injection and other measures worth more than 19 billion francs earlier this year, and is necessary because UBS is suffering the effects of still holding in risky assets on its books."
The news sharply raises concerns for US banks that hold similar assets. Whether the problems are as pervasive at Citigroup (NYSE: C) or Bank of America (NYSE: BAC) remains to be seen. Brokerages such as Merrill Lynch (NYSE: MER) also has these type of financial instruments on its books.
Goldman Sachs recently estimated that the total fall-out from subprime and other distressed assets will be $460 billion. It claims that only $120 billion of that has been written off so far.
Write-offs of that magnitude could cause US banks to have to raise more capital. If a bank like Citi has to raise another $10 billion against its market cap of $112 billion, it could easily take the stock from its current level of $21 to a new low of $15 or $16.
It is going to happen. It is just a matter of when.
Douglas A. McIntyre is an editor at 247wallst.com.
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