Jeff Sica: UBS Has
Significant Debt Exposure
October 14, 2011
that governments are less likely to come to the rescue of financial
institutions prompted Fitch credit ratings agency to downgrade its
outlook for several major banks.
Credit Suisse was placed on ratings watch, Morgan Stanley was placed on
watch negative, UBS was downgraded to A from A-plus late Thursday as
Fitch completed a review of the banks.
UBS AG had sustained a $2-billion loss from unauthorized trading at its
investment bank. And Moody's also plans to review the Swiss bank's debt
ratings, in light of what the ratings agency calls the ongoing
weaknesses in the firm's risk management and controls.
Analyst Jeff Sica of Sica Wealth management says UBS has significant
"Their credit rating will continue to be under scrutiny because they
have already established they have exposure," said Sica. "They have yet
to come clean on the amount of exposure they have in the leverage
components involved in that exposure. UBS being the biggest is a very
Also downgraded were the Royal Bank of Scotland and Lloyds banking
group. Last week, Moody's cut its ratings on the two U.K. banks for the
says it is no coincidence several American investment banks were put on
the watch list.
"The fact that there were a number of banks like Goldman Sachs and
Morgan Stanley, Bank of America that are also being put on watch
negative is concerning," he said. "They are U.S. banks. We have been
continually speculating on the level of interdependence of U.S. banks on
the foreign banks."
Meanwhile, JP Morgan Chase reported Thursday a four percent drop in
income during the last quarter in its investment banking group. Next
week several other big banks will be reporting, including Citigroup.