Despite some big hits taken by the big banks, Wall Street appears unfazed.

Both Swiss-based UBS and New York-based Citigroup forecast hits to their respective bottom lines for the third quarter, largely tied to subprime bleeding, but investors appeared to take the news in stride.

“Both of their stocks went up shortly after the announcement,” said Peter Gioia, vice president and economist for the Hartford-based Connecticut Business & Industry Association. The question remains, he added, “Who else is out there that is vulnerable?”

For UBS, the losses for the quarter that ended Sept. 30 are projected to fall between $513 million and $685 million.

In a prepared statement, Chairman and Chief Executive Officer Marcel Rohner blamed the losses on “deteriorating conditions in the U.S. subprime residential mortgage market.” He also announced plans to make some management changes and lay off 1,500 employees. The company employs about 80,000 people worldwide, and has more than 4,000 employees – part-time, full-time and contract positions – in Stamford.

“We cannot say at this point in time what regions those [layoffs] will occur in,” said company spokesman Doug Morris.

The company’s operations in Stamford include a 103,000-square-foot trading floor, which is the largest trading floor in the world, Morris said. That facility alone has 2,000 computers, 5,000 monitors and more than 1,400 employees, he said.

The deterioration in U.S. subprime residential mortgage-backed securities, particularly in August, was more sudden and more severe than in recent history, and money from investors dried up, according to a statement from UBS. That trend led to substantial valuation losses, including dips in securities with high credit ratings.

“On Aug. 14, I said that if turbulent conditions prevail throughout the quarter, we will probably see a very weak trading result in the [company’s Investment Bank division], offset by predictable earnings from wealth and asset management,” said Rohner in the company statement. Conditions remained turbulent, he added, leading the company to take an overall pretax loss for the quarter.

Citigroup’s woes had a similar tone.

The bank has forecast a 60 percent drop in its net income for the third quarter, compared to the same period last year. The company blames the decline on lost valuation totaling $3 billion on subprime mortgage-backed securities and commercial loans. Citigroup also cited its move to boost its loan-loss reserves by $2 billion as a drain on profits.

The bank reported write-downs – reductions in value of assets – of $1.4 billion on highly leveraged loans, or loans to companies that already have significant debt. The bank also reported write-downs of $1.3 billion on subprime mortgage-backed securities.

The climbing rate of delinquencies and foreclosures, largely among the subprime mortgage market, has scared investors away from mortgage-backed securities and other forms of debt. Banks, in turn, have had the choice of writing down the value of those assets – in an effort to draw investors – or keep the assets on their balance sheets.

‘A Wave of Fear’

Investors’ confidence in those assets may be slow to return.

Statewide, the number of lis pendens petitions – written notice that a lawsuit has been filed concerning the title or some interest in real property, often connected with the initiation of foreclosure proceedings – has been on the rise, and a growing number of adjustable-rate mortgages are scheduled to reset at higher interest rates.

Through July of this year, there have been 10,262 lis pendens petitions, according to data from The Warren Group, The Commercial Record’s parent company. That compares with 7,697 and 6,731 for the same periods in 2006 and 2005, respectively. If the rate through the first seven months continues, 17,592 petitions will be filed this year – a level not seen since 15,145 were filed in 1996.

Meanwhile, the statewide number of adjustable-rate mortgages scheduled to reset in the fourth quarter of 2007 is roughly double what it was in the fourth quarter of 2006 and the first quarter of 2007. Through the end of 2007 and through most of 2008, the number of loans projected to reset each month hovers between 1,200 and 1,400, according to the San Francisco-based data firm First American Loan Performance.

As investors hold back their funds, businesses are concerned about the future of the availability of credit.

“Current conditions are still quite good,” Gioia said. “But there is extreme concern about future conditions.”

Gioia pointed to the results of a recent survey – conducted by CBIA and Donald Klepper-Smith, chief economist and director of research for Florida-based DataCore Partners, and sponsored by TD Banknorth – that polled 259 executives statewide in August.

While 82 percent of the respondents said the availability of credit is not a problem for their firms, 37 percent said they expect credit conditions to deteriorate in the coming months. The latter figure is up from 17 percent in the same survey conducted in the second quarter, and 10 percent in the first quarter of the year, according to CBIA.

“Subprime has sent shockwaves throughout the system,” Gioia said. “I think [investors] are gun-shy. There are a lot of people who got burned.”

Contrary to some of the lax loan underwriting practices seen a few years ago – which added fuel the subprime inferno – lenders are now much more likely to err on the side of caution, he added.

“I think there is a wave of fear of doing something wrong,” Gioia noted. “I think you’re going to see a lot more people asking a lot more questions.”