Swiss banking giant UBS AG, which recently ousted its chief executive in the wake of losses at an in-house hedge fund and defections of top investment bankers, plans to write down as much as 4 billion Swiss francs, or $3.41 billion, in assets, including securities tied to U.S. subprime mortgages.
The big write-downs will make UBS one of the highest-profile casualties of the recent turmoil in global credit markets and raises questions about the management of its securities business, especially its expansion into the U.S.
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After taking a third-quarter write-down of between 3 billion francs and 4 billion francs on its fixed-income assets, UBS expects a loss for the quarter ranging from about 600 million francs to 700 million francs, people familiar with the matter said. For the year-earlier quarter, UBS reported net profit of 2.2 billion Swiss francs. (See related article.)
From Bloomberg:
Citigroup Inc., the biggest U.S. bank, cut its third-quarter earnings forecast, citing ``weak performance'' in fixed-income credit markets and writedowns on leveraged loan commitments and mortgage-backed securities.
Citigroup expects to report a decline in net income of about 60 percent from the same period a year earlier, the New York- based bank said today in a statement distributed by Business Wire.
The Financial sector is approximately 20% of the S&P 500. However, this sector is still trading poorly.
Note the following:
1.) The XLF is trading below the 200 day SMA and has been for almost two months. Trading below the 200 day SMA is traditionally considered to be a bearish indicator.
2.) There is no discernible uptrend in the price action.
3.) There is some possible good news in he 10 and 20 day SMA, as both are trending up. However, these are not strong uptrends in either SMA.
Short version -- the financials look terrible. Considering this news from UBS, I would expect this sector to look terrible for the foreseeable future.
