CHESSNOID

Another European bank has announced that it will have to write down another $10 billion due to the subprime market in the US. This is the first time I have heard about this bank in the news. It is definitely a lot of money and even a bigger surprise for its investors considering they were told that they would be posting a profit just a month ago. It is crazier that a big bank like UBS has to borrow money from outside investors to avoid chaos.

According to CNN.Money:

“In our judgment these writedowns will create maximum clarity on this issue and will have the effect of substantially eliminating speculation,” he added.

The bank said it will borrow around 13 billion Swiss francs ($11.51 billion) from outside investors, sell treasury shares and replace its 2007 cash dividend to shareholders with a stock dividend, bringing in a total of 19.4 billion francs ($17.18 billion) to shore up its capital base.

In October the bank downgraded the value of some assets by over 4 billion francs ($3.4 billion) because of losses linked to the U.S. mortgage crisis.

The writedown meant UBS posted a net loss of 830 million francs ($712 million) in the period ending Sept. 30, the first quarter in nine years in which it suffered an operating loss.

I don’t know if this will affect US investors as far as their confidence is concerned, but this does raise more concerns of how bad this global recession will be in the next few quarters. When these big companies announce big losses, usually a big layoff is not far behind. They generally have to make their books look good for investors by cutting costs and labor is a quick fix for them in the short run. This week there are to be some US stock brokerages announcing their earnings. I wonder if the stock market momentum will continue in anticipation of another interest rate cut by the federal reserve.