UBS, the world's biggest money manager, has given warning that the impact of the credit crunch could linger into the new year.

While confirming that its investment banking division is unlikely to break even for the rest of the year, Marcel Rohner, the Swiss bank’s new chief executive, said that even in the first quarter 2008, the bank's performance “will depend on where we end with the US housing market”.

As it reported heavy third-quarter losses, UBS repeated warnings of further writedowns. Mr Rohner refused to provide detailed forecasts, however.

He said: "The range of possible outcomes is widening”. UBS should return to profitability at group level during the final quarter, he said.

BACKGROUND

• Elephant slumps in wake of crunch

• Heads on the block, investors call for change

• Credit crunch forces Delek to leave property deal

• US rate cut looks certain after new data

• Bank of America to axe 3,000 after 'our errors'

BACKGROUND

• More pain for private equity industry

• Russian state bank poised to boost liquidity

• House prices‘to stay flat for years’

• Will soaring oil pump up inflation?

• US bank slump goes on

Black clouds loom on horizon

For the first time in 15 years, I am seriously worried about the outlook for the economy, the housing market and sterling

Float on the job market

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The bank reported a net pre-tax loss of SwFr726 million (£301 million), compared with a SwFr2.814 billion profit in the same period last year.

“Our third-quarter result was unquestionably disappointing. However, we have introduced a number of measures to improve performance,” Mr Rohner said. “We are also taking steps to strengthen our market risk management.”

UBS's shares fell 0.97 per cent to SwFr61.55 in early morning trading.

Despite a healthy performance at its investment bank since the beginning of the month, the bank’s fixed-income, currencies and commodities (FICC) unit is not out of the woods yet.

“The FICC business remains exposed to further deterioration in the US housing and mortgage markets,” said Mr Rohner.

About 1,500 workers in UBS divisions hardest hit by the closure of the credit markets will have been made redundant by Christmas. Mr Rohner said further staff cuts are unlikely.

Today’s news has been widely trailed. Yesterday, the bank rebuffed weekend reports that results would be worse than expected but did admit that further writedowns related to the crisis in the US sub-prime market may be necessary between now and the end of the year.

Outside of the affected areas, net new money in wealth management was SwFr 40.2 billion in the third quarter, up from SwFr 26.8 billion in the same period last year.

UBS has had an unstable year. In May it closed its hedge fund venture, Dillon Read Capital Management, after huge losses linked to the corrosion of the US sub-prime mortgage market.

In July, Mr Rohner replaced Peter Wuffli as chief executive.

Deutsche Bank and Credit Suisse are also all expected to announce big writedowns following the shock $7.9 billion (£3.8 billion) losses announced by Merrill Lynch last week.

At the beginning of the month, Deutsche Bank said profits would be up, despite likely writedown charges of €2.2 billion (£1.5 billion) on leverage-loan commitments.

Credit Suisse is expected to have fared the best, having had less exposure to collateralised debt obligations and sub-prime lending.

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