August 14, 2007 (LPAC)--In the middle of announcing "record" gains for the past quarter, UBS Bank, Switzerland, the largest bank in Europe, dropped some news of "market moving" potential: their profits for the coming months would likely not come up to expectations. UBS shares fell 3.9% on the news, and 14% for the year, but they were not alone. Shares in Deutsche Bank, Germany's largest bank, have dropped 7% this year, and Credit Suisse, Switzerland's second-biggest bank, has seen its shares drop 5.7% in 2007.

The major cause of UBS' losses was the collapse of one of their hedge funds, Dillon Read, which had made, in the words of Bloomberg reporter Jacob Greber, "wrong way bets" in the US sub-prime mortgage market. According to Reuters, UBS closed its Dillon Read Capital Management hedge fund unit in May, 2007, just five months after opening its doors--an embarrassing setback. "UBS was the darling of the market and it's now a fallen angel," according to a Zurich fund manager who helps oversee about $50 billion and holds UBS stock. "Investment banking is showing signs of the storm over the Atlantic."