Friday 1 February 2008

U & Us - parted from honesty (UBS)


Much of the focus of the UK stock market at the moment is the scale write-downs due out of RBS, Barclays, HSBC etc. The speculation alone on the major banks accounts for over 1% of movements in the market on any day in January. Volatility rules the day.

Yet the banks quell speculation by saying nothing is wrong, whilst doing little to prove nothing is wrong and as we all know actions speak louder than words. I am awaiting RBS's results at eh end of this month with much anticipation. A disaster there and this really will be a bad year.

However, spare a thought for shareholders in UBS. The worst affected bank in Europe in terms of exposure to sub-prime lending. A group of intelligent shareholders clubbed together to demand an independent audit of its overall sub-prime position in order to finally get to the bottom of how much mess the bank was in. The Management are strongly against this; does not leave room for much hope there does it? The share price is dropping still, down nearly 40% year on year.

To add to this, UBS has also tapped up a sovereign wealth fund- Singapore in this case, to urgently hand over some money to repair its balance sheet. However, the nice preferential rate of interest given to Singapore is denied to all other shareholders and there is a vote today for its 'alternative capital structure.' Again management are so desperate they will agree to anything in return for large dollops of money.

UBS is in a very bad place indeed this week, having announced huge write-offs too. Somehow I don't think they will be running their cheesy adverts again anytime soon.

11 comments:

Anonymous said...

"A group of intelligent shareholders clubbed together to demand an independent audit of its overall sub-prime position"

Actually proving that the company is in the sh*t may have a rather determinental impact on the share price. Intelligent? If you think the bank is in that bad a state its best to sell your shares before anyone finds out. Unless of course you are in fact shorting someone elses shareholding.

Of course if the audit shows that UBS is being economical with the truth about its financial position it will have a huge impact on the global banking system. If you can't trust UBS who can you trust?

Old BE said...

Has Fight Club come to pass?

I think it's time to turn on the printing presses and hyperinflate our way out of trouble, Mugabe style. After all, the Harare stock exchange has shown excellent growth recently.

CityUnslicker said...

Real S - Of course you are right the managers are making the right call in terms of protecting the share price.

However it also suggests they know there are many more losses than they have let on; this is detrimental to the share price and their credibility.

I am glad I have nothing to do with UBS, it is rivalled only by Northern Rock and Citigroup at the moment in terms of sheer incompetence.

Increasingly I think one of the big brands may go bust at some point this year.

CityUnslicker said...

Ed - careful what you wish for

CityUnslicker said...
This comment has been removed by the author.
Anonymous said...

Rio Tinto up 15.5%. The stock market has decided that all will be well with UK PLC. We will simply sell everything to the communists. All are equal in the free market and a communist's cash is as good as the next man's.

UK PLC for sale to the highest bidder. Welcome to the new fuedalism and the serfdom it entails.

Sackerson said...

I fear Real Schadenfreude may be correct in his second comment.

CityUnslicker said...

maybe, but we can always look at the bright side...

the japanses tried to buy america in the late 1980's - remind me how this all works!

hatfield girl said...

Are we nearly there yet? (forgive me for sounding like a child in a car).

Monolines sinking, UBS, never mind US banks much bigger than Northern Rock but hardly worth a mention, ......

And the UK economy with Brown at the helm!

It's actually quite hard to spend money - so if we should start now would someone say.

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