Financial Firms Face $600 Billion of Losses, UBS Says (Update1)
By Abigail Moses
Feb. 29 (Bloomberg) -- Financial firms are likely to face at least $600 billion of losses as the crisis triggered by the collapse of subprime mortgages batters banks, brokers and insurers, UBS AG analysts said in a report today.
Financial institutions have disclosed more than $160 billion of writedowns and credit losses. Banks and brokers stand to lose $350 billion, according to estimates from UBS's global banking team.
``We have to recognize the risk that the economy will suffer more damage than what consensus suggests,'' wrote Geraud Charpin, head of European credit strategy at UBS in London. ``All the investment schemes that have been built on the basis of a strong and resilient economic backdrop have to be unwound/ scaled down.''
American International Group Inc., the world's largest insurer, reported the biggest quarterly loss in its 89-year history yesterday after an $11.1 billion writedown on derivatives linked in part to subprime mortgages. London-based Peloton Partners LLP said yesterday it is being forced to liquidate a $1.8 billion hedge fund managing asset-backed debt because of tighter lending restrictions on Wall Street.
``The collapse of Peloton's flagship fund yesterday is a reminder to all investors that yesterday's rising star can be tomorrow's fallen angel,'' Charpin wrote. ``Leveraged risk positions are a cancer in this market and the sooner it is treated the better.''
