Swiss bank, the latest European bank entangled in the U.S. subprime market, has a $1.5B loan to the troubled mortgage lender.
Read this tell me what you think, NEW Century closed there doors last week, now they are trading again? I smell BK!!!! That means they will still lend and at a discount!!!!!ZURICH (Reuters) -- Swiss bank UBS said it had exposure to troubled United States subprime lender New Century Financial, becoming the latest European bank to become embroiled in the U.S. mortgage market.
A spokesman for the Swiss bank confirmed the existence of a loan, but declined to quantify it. "I can only say the facility is secured," said the spokesman.
Regulatory filings show that UBS (up $0.30 to $57.38, Charts) had an exposure of $1.5 billion to New Century last year, but an analyst said it may now be lower. Britain's Barclays (up $1.32 to $56.02, Charts) also has exposure to New Century, according to regulatory filings.
One analyst, who asked not to be named, said that Credit Suisse (up $0.97 to $68.80, Charts) and Deutsc Bank (up $0.93 to $127.25, Charts), also had loans out to New Century. A Credit Suisse spokesman declined to comment.
A filing in September with the U.S. Securities and Exchange Commission (SEC) showed Credit Suisse's exposure was slightly higher than $500 million, said the analyst.
"All these exposures are secured. It is fully collateralized exposure, unless the value of the collateral is slightly impaired," said the analyst, with a major European bank.
"I think even a 20 percent loss is unlikely and it is possible there is no loss," the analyst added.
UBS were not originators for the subprime mortgages but provided financing for them, an industry source said, adding that the Swiss bank appeared not to have encountered any performance problems with the originators of the mortgage
Shares in New Century plunged 69 percent on Monday, hit by fears that it could be driven out of business amid growing worries over subprime mortgage lending in the United States.
UBS shares were trading 0.5 percent lower at 8:25 a.m. ET and Barclays stock was 0.7 percent higher.
Subprime lenders, which extend loans to people with poor credit histories, are at the center of the latest worries.
Europe's largest bank, HSBC Holdings (up $1.10 to $87.00, Charts), said Monday that problems in the subprime market had helped drive up its North American bad debts by 38 percent last year to $6.8 billion.
HSBC in recent years became a buyer of subprime loans originated by other lenders in the U.S.
The problems with lending to higher risk home borrowers have already prompted HSBC to fire the head of its North American business and shake up its operations there.
Other major European banks with interests in the United States appear to be less exposed to subprime loans.
BNP Paribas said in a recent presentation that its U.S. bank BancWest had a "a marginal subprime exposure." Subprime loans accounted for less than 2 percent of BancWest's home equity loans and under 1 percent of first mortgages.
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