UBS, Switzerland's biggest bank, is set to write down a further $5 billion (£2.79 billion) in assets.

The bank is also expected to post a loss in the second half of the year, according to Swiss weekly newspaper SonntagsZeitung. Subprime losses account for $1 billion of the writedowns, while Alt-A loans — one step up from subprime in credit terms — represent another $1 billion.

UBS's investments in bond insurers will make up the rest of the writedown. So far, the bank has written down $42.5 billion on its subprime- related assets. It posted a net loss of Swfr358 million (£217.6 million) in the second quarter.

Chairman Peter Kurer insisted last month that the bank would still return to profitability next year.

He compared the current situation faced by the bank to the aftermath of a severe storm.

“One must first remove the fallen trees, then tidy up the house and cellar, and in the third phase, bring the shine back to the house,” he said. Kurer added that UBS was currently going through the second phase.

The latest problems for UBS underline its dramatic fall from grace. In 2006, the bank was seen as one of the safest and most profitable among top global lenders. But after the subprime mauling, it was by last December looking for a financial lifeline from sovereign wealth funds, selling a stake of more than 10% to investors from Singapore and the Middle East.

Bad bets on US mortgage markets left it the worst-hit of all non-US banks. Singapore's state investment injected almost $10 billion in fresh capital that was hailed by UBS as the “first step” in a major reorganisation of its activities.

The subprime crisis cost Peter Wuffli his job as chief executive last year amid writedowns of $33 billion. UBS said in April it was writing down a further $19 billion on its investments in mortgages, and turned to shareholders for another Swfr15 billion.

UBS's longtime chairman, Marcel Ospel, abruptly resigned after the announcement, which followed months of criticism from shareholders. He was succeeded by Kurer, then the company's chief lawyer.

The bank has been slashing costs, with plans to reduce the workforce by 5500 by the middle of the next year.

Marcel Rohner took over as chief executive in July of last year and began the cost reduction programme in May. One of his first acts was to sell $15 billion of distressed mortgage assets to the funds management company BlackRock and to announce he would close down the bank's institutional municipal bond business in the US.

The 5500 job cuts were made across all levels of seniority, and came on top of the 1500 positions eliminated since October. The axe has fallen most heavily on operations in London and the US.