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Global banks' woes worsen

More write-downs could cost $203B, UBS analyst says.

NEW YORK - Global banks face up to $203-billion in further write-downs from the crisis facing bond insurers and from bad bets on mortgage-backed securities and leveraged buyouts, UBS AG said Friday.

"The problem is broadening from just subprime CDO (collatoralized debt obligations) write-downs to potentially a much bigger credit problem" that may touch even prime mortgages, credit cards and commercial real estate, UBS analyst Philip Finch said in a research note.

This is unwelcome news for international banks, which already suffered $150-billion in credit market-related write-downs tied to last year's subprime fallout.

UBS itself wrote down more than $18-billion in assets last year and may need to write down up to another $18-billion this year, a Citigroup analyst said Thursday.

Finch figures banks face between $40-billion and $120-billion in write-downs related to the crisis facing monoline bond insurers.

The sector faces intense pressure from regulators and New York Gov. Eliot Spitzer, who warned Thursday that regulators may act against top insurers if they can't raise enough capital to fix their financial problems in the coming few days.

The sector also faces another $50-billion in write-downs from mortgage-backed conduits and structured investment vehicles, $18-billion from collatoralized mortgage-backed securities and $15-billion from leveraged buyout debt, Finch wrote.

The write-downs also will have the side effects of cutting banks' revenue as they become more risk-averse and scale back their high-risk, high-yield businesses, Finch wrote.

A regulatory backlash against global banks may also be brewing, Finch notes, saying an April report by global banking regulators may recommend more strict capital requirements for global banks.

[Last modified February 16, 2008, 00:24:26]