UBS reported a net loss of 4.4 billion Swiss francs ($3.97 billion) for 2007, with a loss of CHF 4.8 billion from continuing operations and a profit of CHF 401 million from discontinued operations.

For the fourth quarter, UBS had a net loss of CHF 12.5 billion. “Last year was one of the most difficult in our history. During the first six months of 2007, the Zurich-based bank produced a net profit of CHF 8,897 million, which was a record for any six month period. While most of our businesses continued to be very profitable, the sudden and serious deterioration in the U.S. housing market, in combination with our large exposure in sub-prime mortgage-related securities and derivatives, has driven us into loss for the year,” said Marcel Rohner, CEO, in a news release.

The firm said that strong results from client businesses offset by losses on mortgage-related positions. In the investment bank, equities and investment banking produced good results and the wealth and asset management businesses performed at record levels.

UBS also sees a tough year ahead. It notes that in the first few weeks of 2008, equity markets worldwide have fallen by an average 12% and credit spreads have continued to widen as investors have become increasingly risk averse. Also, economic data has deteriorated, especially, but not only, in the United States.

The Federal Reserve has cut U.S. interest rates, it points out, but adds that action will take time to ease pressures in both the real and the financial economy. “Our employees and senior management are committed to managing our business in a disciplined fashion, while continuing to deliver outstanding services to clients — and we believe this is the best way to earn the confidence of our shareholders,” said Rohner.