UBS revised its outlook for the fourth quarter in 2007 from an overall Group profit, as anticipated in its announcement of 30 October 2007, to a loss. It is now possible that UBS will record a net loss attributable to shareholders for the full year 2007.

In response to continued deterioration in the US sub-prime mortgage securities market, partly driven by increased homeowner delinquencies but mainly fuelled by worsening market expectations of future developments, UBS further announced that it has revised the assumptions and inputs used to value US sub-prime mortgage related positions.

This will result in further writedowns of around USD 10 billion, primarily on CDO and "super senior" holdings.

In light of continued deterioration in the sub-prime market, valuations of UBS's remaining sub-prime positions reflect the extreme loss projections implied by the prices achieved in the very limited number of observable market transactions in US sub-prime related securities and indices up to the end of November.

However, UBS revealed that growth in net new money continues, with inflows in Global Wealth Management & Business Banking totalling about CHF 30 billion in October and November. The banks has said that it will therefore strengthen its capital position by issuing new capital in transactions with strategic investors, by selling treasury shares, and by replacing its 2007 cash dividend with a stock dividend.

In addition to this, UBS has reached agreements with two strategic investors to subscribe to an issue of CHF 13 billion of mandatory convertible notes. This is subject to the approval of UBS shareholders at an extraordinary general meeting (EGM) which will take place in mid-February 2008.

Marcel Ospel, Chairman, UBS observed that: "Our losses in the US mortgage securities market are substantial but could have been absorbed by our earnings and capital base. Nevertheless, it is important to always maintain a notably strong capital position to support the continued growth of our wealth management business, which is the largest generator of value to UBS shareholders."

He added:

"In future, we will make certain that our investment banking operations grow by concentrating on serving the needs of institutional and corporate clients, and on maximising synergies with wealth and asset management."