UBS is in talks with investors to back a new company containing at least $31 billion (£15.7 billion) of American mortgage assets in an attempt to draw a line under the bank’s disastrous dalliance in US sub-prime.

The dire first-quarter update from Switzerland’s largest bank came as Morgan Stanley/Oliver Wyman research predicted a further $75 billion in writedowns from the world’s biggest banks, hitting investment banking revenue this year by 20 per cent.

Deutsche Bank said yesterday that it would take a €2.5 billion first-quarter writedown because of “significantly more challenging market conditions”.

UBS spelt out its remaining exposures to high-risk residential mortgages, which it plans to move into a new on-balance sheet investment vehicle. The bank hopes to attract investors in the vehicle, which would enable UBS to reduce its own holding and cut the risks posed by the damaged investments.Marcel Rohner, the chief executive, said that the bank, which has offloaded American mortgages worth more than $23 billion since the end of December, was already in contact with interested buyers of distressed assets. Selling stakes in the vehicle to hedge funds and other investors would save UBS from conducting a fire sale of the assets and thus incurring even greater losses.

The bank has $15 billion-worth of sub-prime mortgage-related positions and $16 billion-worth of Alt-A mortgages on its books. Most of these are likely to be moved into the new vehicle, although the bank has not said when it will be set up, what its structure might be or how quickly outside capital might be injected. The new company is expected to be levered between 3.1 and 4.1 times.

Analysts said that the investment vehicle was not a quick fix. Dirk Hoffmann-Becking, of Sanford Bern-stein, said: “The new entity is . . . most likely to continue to mark to market these exposures and hence does not remove the problem of continuing writedowns.”

Flokert Jan Van Der Veer, of Dresd-ner Kleinwort, described the bank’s position as a “waiting game . . . UBS is very much dependent on the market recovering. When there’s no risk appetite, it limits your possibilities.”

Mr Rohner insisted that he was seeing a small revival in the market for mortgage-backed securities. “There is some buying and selling going on,” he said.

Nevertheless, investors were sceptical about the extent of the rejuvenation. Toby Nangle, a fixed income fund manager at Barings Asset Management, said: “We’re constantly checking liquidity in the market and there doesn’t seem to be much demand for anything mortgage-related. That said, UBS is a huge wealth manager and may well know where the demand lies.” Mr Nangle said it was unlikely that the bank would invest in the new vehicle with assets managed by its wealth management division. “I think such a move would be very heavily scrutinised,” he said.

Analysts were spooked yesterday by UBS’s warning of a “weaker pretax performance” at the bank’s global asset management business. Meanwhile, the wealth management and business banking division is “expected to achieve positive net new money” in the first quarter, UBS said. The most serious fund outflows occurred in Switzerland during February and March, as critical media coverage in UBS’s home nation scared away customers, according to Mr Rohner.

Analysts at Keefe, Bruyette & Woods commented: “[This] does not help [to] diminish fears that the core wealth management franchise has been impaired by reputational problems elsewhere.”

The bank deflected questions on whether it would spin off its investment bank, which had been created by outgoing chairman Marcel Ospel. “Clearly, we don’t want any cross-sub-sidisation,” Mr Rohner said.

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