Fazle Rashid from New York
Thursday, 21 August 2008
Fazle Rashid from New York
THE banks in trouble both in the US and Europe are making last minute ditch to salvage whatever they could in a strong bid to stay aloaft. The latest trend is to split the banking units or put to sale their bonds. Almost all renowned banks are doing the same.
The Swiss banking giant, UBS, in a recent announcement said it was delinking its three units and turning them into separate entities. UBS's three main units are wealth management that focuses on banking for private clients, the second is assets management and the third is the investment bank that bore the brunt of recent losses. The bank aiming to make hefty returns and compete with known rivals, invested heavily on subprime mortgage securities which collapsed.
UBS has written off $43 billion since the collapse of the mortgage banking, making it the hardest hit in Europe. Two reputed American banks -- Citigroup in which a Saudi prince is the largest shareholder and Merrill Lynch -- respectively have more than $56 billion and $45 billion in credit losses and write-downs.
To reinvigorate its dwindling capital base the Swiss banking giant is seeking emergency investments from Singapore and the Middle East. UBS shareholders sighed a breath of relief but asserted that the bank needed more to do to repair the damage. There was panic withdrawal from the bank. The biggest withdrawal took place in April. The wealth management unit of the bank contributes more than 70 per cent to the overall income of the bank.
UBS posted revenue of $3.69 billion in the second quarter down from $14.8 billion in the corresponding period 2007. Lehman Brothers, another giant US investment bank is contemplating the sale of all or part of its lucrative money management division to build its capital base. The bank did not put a price tag on its disposal proposal. Lehman is confronting capital raising problem. To do so the bank may have to lower the cost to attract buyers. But there is an inherent danger in it. Lowering the price could wipe out all of bank's earnings.
The ten banks that have suffered losses are (loss in bracket) Citigroup ($54.6 billion), Merrill Lynch ($51.8 billion), UBS ($38.2 billion), HSBC ($27.4 billion), Wachovia ($22 billion), Bank of America ($21.2 billion) IKB ($15.9 billion), Royal Bank of Scotland ($15.2 billion), Washington Mutual ($14.8 billion) and Morgan Stanley ($14.4 billion). The heads of the CEO rolled in Citigroup, Merrill Lynch, UBS, IKB and Wachovia. The figures have been collated from the August 9th issue of the Economist. Firing people does not guarantee success, the Magazine said.
THE banks in trouble both in the US and Europe are making last minute ditch to salvage whatever they could in a strong bid to stay aloaft. The latest trend is to split the banking units or put to sale their bonds. Almost all renowned banks are doing the same.
The Swiss banking giant, UBS, in a recent announcement said it was delinking its three units and turning them into separate entities. UBS's three main units are wealth management that focuses on banking for private clients, the second is assets management and the third is the investment bank that bore the brunt of recent losses. The bank aiming to make hefty returns and compete with known rivals, invested heavily on subprime mortgage securities which collapsed.
UBS has written off $43 billion since the collapse of the mortgage banking, making it the hardest hit in Europe. Two reputed American banks -- Citigroup in which a Saudi prince is the largest shareholder and Merrill Lynch -- respectively have more than $56 billion and $45 billion in credit losses and write-downs.
To reinvigorate its dwindling capital base the Swiss banking giant is seeking emergency investments from Singapore and the Middle East. UBS shareholders sighed a breath of relief but asserted that the bank needed more to do to repair the damage. There was panic withdrawal from the bank. The biggest withdrawal took place in April. The wealth management unit of the bank contributes more than 70 per cent to the overall income of the bank.
UBS posted revenue of $3.69 billion in the second quarter down from $14.8 billion in the corresponding period 2007. Lehman Brothers, another giant US investment bank is contemplating the sale of all or part of its lucrative money management division to build its capital base. The bank did not put a price tag on its disposal proposal. Lehman is confronting capital raising problem. To do so the bank may have to lower the cost to attract buyers. But there is an inherent danger in it. Lowering the price could wipe out all of bank's earnings.
The ten banks that have suffered losses are (loss in bracket) Citigroup ($54.6 billion), Merrill Lynch ($51.8 billion), UBS ($38.2 billion), HSBC ($27.4 billion), Wachovia ($22 billion), Bank of America ($21.2 billion) IKB ($15.9 billion), Royal Bank of Scotland ($15.2 billion), Washington Mutual ($14.8 billion) and Morgan Stanley ($14.4 billion). The heads of the CEO rolled in Citigroup, Merrill Lynch, UBS, IKB and Wachovia. The figures have been collated from the August 9th issue of the Economist. Firing people does not guarantee success, the Magazine said.