U.S. results may be hard to read for European banks

By Andrew Hurst, European Banking Correspondent

ZURICH (Reuters) - Investors are bracing for grim news from major American banks when they report full-year results this week, but the implications may be tricky to interpret for European banks such as UBS (UBSN.VX), that have already been badly scalded by the subprime crisis.

UBS is Europe's biggest subprime casualty, with $14.5 billion (7.4 billion pounds) of writedowns, but even its losses might pale in comparison with Citigroup (C.N), which could write off as much as $24 billion, according to a report on CNBC's website.

As well as Citi and Merrill Lynch MER.N, which has also been badly hit by the subprime debacle, other top banks such as JP Morgan (JPM.N) are reporting their results this week.

Even a huge writedown by Citigroup on Tuesday would not automatically be seen as foreshadowing more bad news from UBS, which announced it latest writedown, of $10 billion, in mid-December.

Citi issued guidance on November 5 that writedowns could total $8-11 billion, after which market conditions worsened.

"The question is one of degree," said Alan Webborn at SG Securities. "Citi gave guidance of $8-11 billion in early November and the figures or writedowns being talked about now are from $16-24 billion. "Trading got worse after November 5, but did the losses double?"

UBS is thought by many analysts to have written down its exposures very aggressively in December, when it also announced plans for a capital injection of 13 billion Swiss francs from Singapore and an unidentified Middle East investor.

"If the news (from Citigroup) is very negative, it could increase suggestions that UBS has not been conservative enough," Webborn said.