Jan. 30 (Bloomberg) -- UBS AG posted the biggest loss ever by a bank after raising fourth-quarter writedowns on securities infected by U.S. subprime mortgages to $14 billion.

Europe's largest bank by assets said today it had a net loss of 12.5 billion Swiss francs ($11.4 billion) for the quarter, almost double the median estimate of analysts surveyed by Bloomberg. The annual shortfall was about 4.4 billion francs, the first since Zurich-based UBS was created through a merger a decade ago.

UBS fell 1.6 percent in Swiss trading as its loss exceeded those reported earlier this month by Citigroup Inc. and Merrill Lynch & Co. The collapse of the U.S. subprime mortgage market has led to more than $130 billion of losses and markdowns at securities firms and banks since June.

``One has to question the management's ability to recognize the problems that have existed and continue to exist,'' said Michael Holland, chairman of New York-based Holland & Co., where he oversees more than $4 billion. ``When you're talking about an $11 billion issue and it's Jan. 30, this raises questions about who is watching and what did they know.''

The losses already cost the jobs of Chief Executive Officer Peter Wuffli, his finance chief Clive Standish, investment- banking head Huw Jenkins and other managers at the securities unit. Shareholders including the Ethos Foundation have also called for a replacement of Chairman Marcel Ospel, 57, who said in December he isn't thinking of resigning.

Record for Bank

The loss, larger than the $9.83 billion reported by Citigroup Inc. Jan. 15, is the biggest for a bank, said Charles Geisst, a finance professor at Manhattan College in Riverdale, New York.

UBS closed 74 centimes lower at 46.06 francs. The stock has fallen 12 percent this month, giving the bank a market value of 95.5 billion francs.

``The damage is enormous,'' said Dominique Biedermann, director of Ethos Foundation in Geneva, which holds UBS shares worth about 80 million francs and has called for an independent audit of the bank's controls. ``It wipes out profit and shows that an inquiry is needed to make sure it doesn't happen again, and eventually whose responsibility this is.''

Ospel and Marcel Rohner, who replaced CEO Wuffli in July, told analysts and investors in London on Dec. 11 that record losses were a result of positions created ``by a small group of people in one team.'' They also ruled out separating the investment bank from the wealth-management unit and instead said UBS will focus on bringing the two businesses closer together, while cutting assets and risk-taking of the securities division.

Subprime Market

The bank increased markdowns directly linked to the subprime market to about $12 billion from the $10 billion it forecast in December and said an additional $2 billion of writedowns are for other U.S. residential mortgage securities. ``Weak'' debt-trading revenue and the sale of securities at a loss to cut risky assets contributed to the results, UBS said.

``Value declines have extended beyond just subprime-related exposures, to new areas, for which we do not yet have disclosure on exposure size,'' Jeremy Sigee, an analyst at Citigroup, said in a note to clients. ``The recently bolstered capital base remains vulnerable to further erosion.''

BNP Paribas SA, France's largest bank, reported a 42 percent decline in fourth-quarter profit today after 589 million euros ($871 million) of credit costs. Paris-based Societe Generale SA last week reported 2.05 billion euros of subprime writedowns and said unauthorized trades cost it an additional 4.9 billion euros, the largest trading loss in banking history.

Full-Year Results

UBS won't publish details of other residential mortgage holdings until it announces its detailed full-year results on Feb. 14, spokesman Christoph Meier said. Today's disclosure brings total writedowns on debt and leveraged loans to $18.7 billion in the third and fourth quarters.

The bank said this month that 2008 will be another ``difficult'' year for financial companies. UBS has the world's biggest trading floor in Stamford, Connecticut, housing as many as 1,400 traders, its Web site says.

Other chief executives who became casualties of the subprime crisis included Merrill's Stan O'Neal, ousted in October, and Citigroup's Charles Prince who quit in November.

Merrill, the biggest U.S. brokerage, reported a record fourth-quarter net loss of $9.83 billion after $16.7 billion of writedowns. Citigroup, the biggest U.S. bank, also posted a $9.83 billion loss after an $18 billion charge. Morgan Stanley and Bear Stearns Cos. also had losses. All four companies are based in New York.

Singapore Government

To increase capital, UBS said Dec. 10 it aims to sell 13 billion francs in bonds convertible into shares to Government of Singapore Investment Corp. and an unidentified Middle Eastern investor. It also proposed replacing the cash dividend with stock and a resale of 36.4 million treasury shares to help raise another 6.4 billion francs.

The company said its so-called Tier 1 capital ratio, a measure of its ability to cover unexpected losses, was 8.8 percent as of Dec. 31, excluding the planned convertible bond sale. International banks need a minimum Tier 1 core ratio of 4 percent and an overall capital ratio of 8 percent.

UBS said this month that it will shut a U.S. group that makes bets on fixed-income investments and cut the number of employees who underwrite, package and trade mortgage-related securities by 50 percent from the peak in August.

`Massive Exposure'

``At this stage who knows what else they might report, we'll have to wait'' until the full results are published, said Florian Esterer, who helps manage $56 billion at Swisscanto Asset Management in Zurich. ``Risk management must have been non- existent as they seem to find massive exposure in all sorts of pockets.''

Standard & Poor's lowered its rating outlook today for UBS to ``negative'' from ``stable,'' saying it may be harder to generate revenue as it reorganizes the investment bank. The outlook on Credit Suisse Group, UBS's biggest Zurich-based competitor, was cut to ``stable'' from ``positive.''

Walter Kielholz, chairman of Credit Suisse, indicated that the bank didn't have large writedowns in the fourth quarter. Credit Suisse is due to publish earnings on Feb. 12.

``We will be releasing our results in 10 days and haven't made any statements,'' as would be required by the Swiss stock exchange's rules on ad hoc publications, Kielholz told Schweizer Fernsehen television at the World Economic Forum in Davos, Switzerland. The interview was broadcast late yesterday.

To contact the reporters on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net; Elizabeth Hester in New York at ehester@bloomberg.net.

Last Updated: January 30, 2008 15:39 EST