The aftermath of the subprime lending crisis continues as Citigroup Inc. and UBS AG both announced quarterly losses on Monday, raising concern that other banks that have yet to report may have similar results in store. New York City-based Citigroup claimed a loss of $5.9 billion while Swiss bank UBS disclosed $3.4 billion in losses.
According to a statement issued by Citigroup CEO Charles Prince, the quarterly losses were "driven primarily by weak performance in fixed-income credit-market activities, write-downs in leveraged loan commitments, and increases in consumer-credit costs."
Despite the troubling news, shares in both companies jumped on Monday. UBS's U.S. shares went up $1.69, or 3.2 percent, to $54.94 in trading Monday, while Citigroup rose $1.05, or 2.3 percent, to $47.72. Shares were boosted by Prince's comments that business conditions are likely to return to a more normal level in the fourth quarter.
Citigroup estimated that their third-quarter profit would decline about 60 percent to some $2.2 billion. In addition, the bank said it would write down about $1.4 billion of its $57 billion portfolio of highly leveraged loans, lose about $1.3 billion on the value of securities backed by subprime loans, and lose $600 million in fixed-income credit trading.
After reporting their first quarterly loss in nine years, UBS, which already replaced its top executive this year, announced it will cut 1,500 jobs by the end of the year and replace some more top people.
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