ZURICH - SWISS banking titans UBS and Credit Suisse risk losing clients to smaller rivals as annual results next week reveal the heavy impact of the US subprime crisis on their balance sheets.

UBS already said last month it expects its first ever full year net loss due to its subprime exposure, closing 2007 some 4.4 billion Swiss francs (S$4.96 billion) in the red.

Subprime losses amount to about 12 billion dollars, with the loss of a further 2.0 billion dollars attributable to other aspects of the US housing market, the bank said.

Losing confidence
UBS 'has lost the confidence of its clients,' said a Zurich-based trader who expects a downturn in the bank's key asset management business.

Funds research agency Lipper said that UBS has seen an 8.4 per cent decline in its assets under management in the past six months, while Credit Suisse has seen a 1.9 per cent fall.

At the same time, medium-sized Swiss banks such as Pictet and Julius Baer have seen their assets under management rise 11.9 per cent and 12.3 per cent respectively over the same period.

Julius Baer said on Friday that some of this rise came from 'a certain number of new clients,' without providing further details.

UBS publishes its full results on Thursday, but already has the unenviable status of the third-biggest loser from the subprime crisis, after Citigroup and Merrill Lynch.

The bank warned in January that 2008 would be a difficult year owing to the fallout from the subprime crisis and turmoil on global financial markets.

'We cannot, at this time, accurately predict the future development of US residential mortgage markets and therefore the ultimate impact on our positions in subprime mortgage-related securities,' UBS said in a letter to shareholders.

Credit suisse
Rival Credit Suisse, which unveils its own full year figures on Tuesday, is expected to fare somewhat better after not getting its fingers so badly burned by subprime, analysts said.

The bank is expected to post a full year profit between 8.6 and 9.4 billion Swiss francs, down from 11.3 billion Swiss francs in 2006.

'Credit Suisse got out of subprime in time, before the market crashed,' said Zuercher Kantonalbank analyst Andreas Venditti.

However the bank is still exposed to other sectors, such as commercial mortgage backed securities (CMBS) and leveraged buy-outs, which could yet fall victim to the credit crunch, he added.

'Problems could arise for the 53 billion dollars worth of LBO-backed securities, and CMBS,' where Credit Suisse has not revealed its exposure, said Landsbanki-Kepler analyst Dirk Becker in a note to clients.

Analysts said both big banks are likely to take further hits from the financial crisis as the year progresses.

For UBS, 'the figures being talked of are around 8-10 billion Swiss francs,' a Zurich trader said.

ZKB expects Credit Suisse meanwhile to announce writedowns of between 0.5-1 billion Swiss francs.

In December, UBS sought to calm troubled waters by seeking fresh capital from Singapore's state investment arm (GIC) and an unnamed Middle Eastern investor.

GIC said it would inject 11 billion Swiss francs into UBS, giving it a stake of around nine percent and thus making it the largest single shareholder, while the Middle Eastern investor was to put up two billion Swiss francs.

However the plan has sparked widespread opposition from smaller shareholders who fear a loss of influence, and who are set to vote against it at a stormy annual general meeting on Feb 27.

The AGM 'will be a long and difficult one for the management,' said Credit Suisse banking analyst Christine Schmid. -- AFP