No major impact seen from ARS buy backs

The announced repurchase of some $35 billion in auction rate securities by major Wall Street firms is not expected to have a material effect on most of the companies. Citigroup Inc. and Merrill Lynch & Co. Inc., both of New York, UBS AG of Zurich, Switzerland, and Wachovia Corp. of Charlotte, N.C., have all said their announced buybacks will not create major financial strains. “Wachovia does not currently expect that the purchase of ARS ... will have a material effect on capital, liquidity or overall financial results,” the bank said in announcing its settlement with regulators last Friday. Citigroup said in a statement that the capital effect of bringing an estimated $7.3 billion onto its balance sheet “is expected to be de minimis.” In its second-quarter financial report, released this month, UBS said its $8.3 billion buyback will create an “immaterial increase in risk-weighted assets” on its balance sheet, although the firm will be taking on other risks with its buyback. Citigroup, Wachovia and UBS are taking pretax charges to cover estimated market losses and other costs related to repurchasing ARS. Merrill has not yet announced any charge-offs.