UBS Drag, FBI Dragnet
UBS writes down $14 billion in subprime-linked assets. The FBI is looking at the U.S. subprime industry with an eye to criminal charges. And Las Vegas really doesn't want the Giants to win this Sunday.
EWS AT A GLANCE
UBS awash in red ink
UBS AG, Europe’s largest bank by assets, wrote down $14 billion in U.S.-subprime-related assets and said it faced a record $11.4 billion quarterly loss. (The New York Times, free registration) The loss was almost double what analysts were expecting. UBS offically reports earnings Feb. 14. “Risk management must have been non-existent” at UBS, said Florian Esterer at Swisscanto Asset Management in Zurich. “They seem to find massive exposure in all sorts of pockets.” (Bloomberg) BNP Paribas, France’s largest bank, also reported a credit market-related hit, as its fourth quarter profit fell 42 percent, to $1.5 billion. BNP had losses in the bond insurance sector. (MarketWatch)
FBI launches subprime probe
The FBI said it is investigating 14 unidentified companies for possible criminal fraud related to subprime lending. The wide-ranging probe, which started last spring, is looking for accounting fraud, insider trading, and other violations at all stages of the mortgage process. The subprime industry is already under scrutiny by the Securities and Exchange Commission and several state attorneys general. (The New York Times, free registration) The criminal probe is bad news for executives at firms under investigation, says former federal prosecutor Jacob Frenkel. “Companies have an incentive to resolve these investigations,” he said. “They don’t go to jail, people do.” (BusinessWeek.com)
Yahoo! reports profit dip, job cuts
Yahoo! reported a 23 percent drop in quarterly profit, to $205.7 million. The results were slightly better than analysts were expecting, but Yahoo! shares fell more than 10 percent in extended trading, due largely to the company’s lowered outlook for 2008. (Reuters) “They threw in the kitchen sink in terms of reducing expectations,” said American Technology Research analyst Rob Sanderson. (BusinessWeek.com) Yahoo! said it is cutting 1,000 jobs, renegotiating a lucrative deal with AT&T, and reallocating resources to reinvigorate long-term growth. While Yahoo! remains the No. 1 Web destination, it is losing search market share to Google. (Los Angeles Times, free registration)
Casinos pin hopes on Patriots
The Super Bowl this Sunday is on track to have the largest betting pool ever for the annual event, with $100 million in legal wagers in Las Vegas, and probably $10 billion total worldwide riding on the game. Las Vegas casinos are rooting heavily for the undefeated New England Patriots. Casinos prefer 50-50 splits in betting, but more people are betting on the underdog New York Giants—at the Las Vegas Hilton, 75 percent of bets were on the Giants to beat the 12-point spread. It could spell trouble for the sports books if they do. “If you find any Patriots fans, make sure to send them our way,” said Race and Sports SuperBook director Jay Kornegay. (The Wall Street Journal)
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