Fire sale rumours push UBS shares to 5-year low

6 March 2008

Shares in UBS fell to their lowest value in five years after analysts from JPMorgan Chase claimed that the Swiss bank may have sold $24 billion of mortgage-backed securities at a massive discount.

Analysts suggest that a 'fire sale' probably took place and they also expect UBS to be hit by more writedowns in future of greater value than previously thought.

The securities involved in the fire sale were believed to be Alt-A investments - the level above sub-prime - and JPMorgan says they were sold to US bond manager Pimco for around 70 cents to the dollar.

Shares in UBS fell by 4.2 per cent to reach their lowest value in five years at $7.21 before rising slightly to close 3.3 per cent down in early morning trading.

Merrill Lynch analysts expect more writedowns at the Swiss bank could be in the region of $21 billion, up from the $13 billion markdown made predicted.

Analysts at Morgan Stanley claimed that UBS could lose between $15 and $25 billion in writedowns in future, putting their previous forecast of a $10 to $15 billion writedown in the shadows.

Europe's biggest bank wrote down around $19 billion last year and the market value of UBS has fallen by 55 per cent over 12 months.

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