UBS and the Subprime Mortgage Crisis


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Case Details:

Case Code : FINC061
Case Length : 22 Pages
Period : 2001-2009
Pub. Date : 2010
Teaching Note :Not Available
Organization : UBS AG
Industry : Banking
Countries : Switzerland, US

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Introduction

For the fiscal year ending December 2008, Switzerland-based banking major, UBS AG (UBS), reported a net loss of CHF 21.3 billion . This was the biggest ever annual loss reported by a Swiss company. The bank attributed its dismal performance to the fixed income trading business under the Investment Banking Group, which had had significant exposure to the US subprime mortgage market. However for industry observers, the news of UBS posting huge losses did not come as a surprise, as the bank had been facing problems due to exposure to subprime mortgage assets since mid-2007. It had also posted a net loss of CHF 5.2 billion for the fiscal year ending December 2007 (Refer to Exhibit I for three-year income statement of UBS).

Founded in December 1998 as a result of a merger between Union Bank of Switzerland and Swiss Bank Corporation, UBS was Europe's fourth largest bank. It was one of the several European banks which had got entangled in the US subprime mortgage crisis, and its total write-downs due to the exposure in the US subprime mortgage market was at around CHF 45 billion as of December 31, 20083 ...

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3] Globo Trends Wiki for Global Business -- Switzerland, www.globotrends.pbworks.com.

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