Could the worst be over? That was the question investors asked yesterday as UBS revealed its worst-case scenario for the effects of the credit crunch.

Switzerland’s largest bank wrote down SFr4bn (£1.67bn) at its fixed-income business, took an axe to its executive team and announced 1,500 investment banking job cuts.

UBS said the write-downs would mean a loss of up to SFr800m for the third quarter. Credit Suisse, UBS’s biggest rival in Switzerland, also felt the pain but said it had a profitable third quarter and was still in line for record profits for the full year.

The quarterly loss will be UBS’s first since it wrote off its investment in Long-Term Capital Management in 1998.

The write-downs included $1bn (£489m) of direct investments in sub-prime mortgage-backed securities and $900m on securities due to be turned into collateralised debt obligations (CDOs), pools of assets that investors are now shunning.

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