Oct. 29 (Bloomberg) -- UBS AG, Europe's largest bank by assets, said the slumping U.S. housing market may lead to further writedowns on debt securities following the company's first quarterly loss in almost five years.

UBS is at risk from ``further deterioration in the U.S. housing and mortgage markets as well as rating downgrades'' on mortgage-related securities, the Zurich-based bank said today in a statement. UBS reiterated its third-quarter loss was between 600 million francs ($516 million) and 800 million francs.

Fallout from the U.S. subprime market cost the world's biggest securities firms and banks more than $30 billion in bad loans and trading losses in the third quarter. UBS reduced the value of fixed-income securities and leveraged loans by about $4.1 billion in the period, and will release detailed third- quarter results tomorrow.

``Nobody knows what these credit structures are really worth and it seems that prices are still in freefall,'' said Florian Esterer, who helps manage $49 billion at Swisscanto Asset Management in Zurich. ``There is continued uncertainty and this is their way of alleviating concerns.''

UBS shares rose 20 centimes, or 0.3 percent, to 62.15 Swiss francs in Zurich trading. The stock has fallen 16 percent so far this year.

Started Well

While the fourth quarter ``started with good results from all businesses,'' UBS can't assume it ``will continue as positively as it has begun, or that the current difficulties will be resolved in the short term,'' the bank said.

Merrill Lynch & Co., the third-largest U.S. securities firm, last week announced the worst quarterly loss in the company's 93- year history after $8.4 billion of writedowns, more than initially estimated.

UBS Chief Executive Marcel Rohner, who replaced Peter Wuffli in July, ousted investment banking chief Huw Jenkins on Oct. 1 and announced plans to eliminate 1,500 jobs. Wuffli had already shut the Dillon Read Capital Management LP hedge fund, seeded in 2005 with $3.5 billion, 80 top traders and investment bank head John Costas.

``We have further possible writedowns,'' said Javier Lodeiro, an analyst at Bank Sal Oppenheim in Zurich who says he's reviewing his ``buy'' rating on the stock. ``It's difficult to remain positive when you have no visibility.''

UBS may be forced to take an extra 3 billion Swiss francs in writedowns, Sonntag CH reported on Oct. 28, citing unidentified sources at the bank.

Christopher Wheeler, an analyst at Bear Stearns Cos. in London, said in a note to investors that had the credit situation at UBS deteriorated since Oct. 1, the bank would have had to include that in its third-quarter results. He has an ``outperform'' recommendation on the stock.

To contact the reporter on this story: Warren Giles in Geneva at wgiles@bloomberg.net

Last Updated: October 29, 2007 12:54 EDT