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Wednesday, January 30, 2008

Suprime Trashes Euro Banks

Bernanke options?Items of interest:

UBS, BNP Paribas reveal fresh hits from credit crisis -- UBS to take $14 bln write-off as it swings to loss; BNP sees profit down 40%

Two of Europe's largest banks revealed fresh problems stemming from the U.S. housing downturn Wednesday. Swiss banking giant UBS extended its latest write-down to $14 billion and France's BNP Paribas said its quarterly profit will slump over 40%.

In a surprise update to the market, UBS said it will post a fourth-quarter loss of around 12.5 billion Swiss francs ($11.4 billion), down from a profit of 3.4 billion francs a year ago and well below the consensus forecast for a loss of 7.5 billion francs.

The result will drag its bottom line for the year down to a loss of 4.4 billion francs.

UBS said the loss reflects fourth-quarter write-downs of $14 billion, including $12 billion related to subprime mortgages and the rest from "other positions" linked to U.S. residential mortgages.

The write-downs were significantly worse than the $10 billion the bank predicted in December, when it said it may swing to a loss for the year and announced plans for an $11.5 billion capital injection. [...]
UBS Takes a $14 Billion Write-Off - NY Times
UBS Drag, FBI Dragnet - Harold Maass, yahoo
Business Week:
Mortgage application volume rises -- Mortgage application volume rose 7.5 percent during the week ended Jan. 25, according to the trade group Mortgage Bankers Association's weekly application survey.

The MBA's application index rose to 1,054.9 from 981.5 the previous week.

Application volume was pushed higher by a jump in refinance volume. Refinance application volume increased 22.1 percent, while purchase volume tumbled 17.7 percent. Refinance applications accounted for 73 percent of total applications.

The index peaked at 1,856.7 during the week ending May 30, 2003, at the height of the housing boom.

An index value of 100 is equal to the application volume on March 16, 1990, the first week the MBA tracked application volume. A reading of 1,054.9 means mortgage application activity is 10.549 times higher than it was when the MBA began tracking the data. [...]
Financial Times:
US homebuilders face growing bankruptcy threat -- The risk of bankruptcies among the big US homebuilders has risen sharply as the economy has weakened and an end to the housing slump remains distant.

Credit default swaps on homebuilders, which act as insurance on corporate debt, suggest some of the biggest are at risk of failing to keep up debt payments. According to Byron Douglass, an analysts at Credit Derivatives Research, the most exposed are Standard Pacific, Hovnanian, Beazer, and Meritage . All are among the top 15 publicly-listed US homebuilders.

On Tuesday Tousa, formerly called Technical Olympic, became the largest homebuilder so far to file for bankruptcy. At least 13 other homebuilders have gone bankrupt since June, according to Bloomberg data.[...]
Tousa, Florida Homebuilder, Files for Bankruptcy -- Tousa Inc., the homebuilder that lost 98 percent of its market value in the past year, sought bankruptcy protection as the Florida housing market's decline deepened.

The company, based in Hollywood, Florida, listed assets of $2.3 billion and debt of $1.8 billion in a Chapter 11 petition filed today in U.S. Bankruptcy Court in Fort Lauderdale, Florida. There were 37 affiliates that also filed today.

Tousa, the largest builder by assets and debts in bankruptcy and at least the 14th to file since June, missed three interest payments this month as home sales and prices fell in Florida, where the company does most of its business. The builder never recovered from the August 2005 purchase of Transeastern Properties Inc., a closely held Coral Springs, Florida-based homebuilder, said Robert Curran, a managing director at Fitch Ratings in New York who covers builders. [...]

Calculated Risk

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