The loss is the first in UBS's history

It made a full-year loss of 4.4bn Swiss Francs ($4bn; �2.02bn) during 2007, compared with a net profit of 12.3bn Swiss Francs in 2006.

The US sub-prime problems have hit the balance sheets of banks worldwide.

UBS management warned that it expected 2008 to be a difficult year for the firm and the industry as a whole.

Restructure struggle

The annual loss was the first since UBS was created from the merger of Union Bank of Switzerland and Swiss Bank Corporation in 1998.

The firm had warned of its poor performance two weeks ago - including $18.4bn of writedowns.

And it has now also unveiled an extra $26.6bn in exposure to risky mortgages.

However these are seen as being of less risk than sub-prime loans, which were lent to US homebuyers on low incomes or with patchy credit ratings.

These investments quickly soured as higher interest rates pushed up mortgage payments and triggered a wave of defaults.

Losses at UBS were far worse than many analysts had expected and the firm is now struggling to restructure its investment banking division to reduce risk and repair its damaged reputation, and it has sought funds from Singapore and the Middle East.