European banks write down billions in losses

GENEVA – Two of Europe’s largest banks, UBS and Deutsche Bank, disclosed Tuesday that they are writing down billions more in bad investments, reflecting the unrelenting wave of woe from the U.S. subprime crisis.

UBS AG announced the surprise departure of its chairman and forecast losses and write-downs of approximately $19 billion in the first quarter. That puts its write-downs for the past nine months at $37.4 billion – the most reported by any bank so far.

Switzerland’s largest bank also said it would post a first-quarter net loss of about $12.1 billion, seek about $15.1 billion in new capital and create a new unit for its troubled U.S. real estate assets.

Deutsche Bank, which has been less affected, said it now expects write-downs of about $4 billion in the first quarter because of “significantly more challenging” market conditions after the plunge in U.S. housing prices, rising defaults and the resulting credit crisis.

The two banks added to earlier warnings that market conditions had worsened sharply in the second half of March. Investors appeared unfazed, however, sending shares in both higher.

Analysts were less convinced that the bad news was over.

UBS’ disclosures were “a clear indication that we are not out of the woods yet in terms of the credit crisis,” said Octavio Marenzi, head of financial consultancy Celent.

“Indeed, the storm clouds are gathering ever more rapidly over the banking industry and, in particular, the U.S. banking industry, where most of UBS’ losses originated from,” Marenzi said.

Deutsche Bank analyst Mike Mayo said he expects global bank losses tied to the housing market to total an additional $50 billion during the first half of the year. Financial services firms have already taken nearly $190 billion in write-downs since the middle of 2007.

All three major ratings agencies downgraded UBS, with Standard & Poor’s citing “risk management lapses, earnings volatility and need for new capital.” Fitch Ratings said the first-quarter loss, coupled with weak market conditions, could lead UBS to post a full-year loss for the second straight year.