UBS AG, Switzerland’s largest bank, will cut as many as 10,000 jobs company-wide as the trading business shrinks, a source with knowledge of the plan said.
Many of the reductions will come in the trading businesses overseen by investment-banking co-head Carsten Kengeter and will probably occur over several quarters, said the source, who requested anonymity because the plans have not been publicly announced.
An announcement may come when UBS reports third-quarter earnings on Tuesday, the source said.
UBS chief executive officer Sergio Ermotti, 52, is overhauling the bank as Swiss regulators pressure UBS and Credit Suisse Group AG to boost capital and scale back trading and investment-banking operations.
Like rival securities firms, UBS has been struggling to boost profitability as client activity and trading remain sluggish.
“It was a loser’s game for them,” said Terry Connelly, former dean of the Ageno School of Business at Golden Gate University in San Francisco and an ex-managing director at Salomon Brothers Inc.
“It wasn’t their fault, they simply tried climbing the wrong mountain,” he said.
High fixed costs and weak demand have made it harder to be profitable, and the industry will have to shrink more, he said.
Ermotti told his staff in a memo this month that he will do whatever it takes “to tackle the current challenging market environment and paradigm shift” in banking and will continue “remodeling” UBS.
He said in July that the market environment has completely changed since the firm announced reorganization plans for the securities unit in November last year.
“UBS is a microcosm for the industry,” Mark Williams, a lecturer at Boston University’s School of Management, said in an interview. “The banking business model is changing and we’ve got to look at cost structure, we’ve got to look at compensation and we’ve got to readjust.”
The bank had about 63,250 employees as of June 30, according to its most recent financial report, meaning the staff cuts could equal 16 percent of headcount.
UBS is reducing risk-weighted assets at the investment bank by more than half from levels in September last year, mostly in fixed income.
The staff cuts were earlier reported by the Financial Times. The eliminations will lead to changes in senior management and reduce costs in the bank’s support functions, including information technology, the FT said.
Serge Steiner, a spokesman for the bank, declined to comment. Since taking office last year, Ermotti has been working to cut production costs across all of the bank’s businesses.
The firm’s boards were meeting in New York to consider a reorganization of the unit that will include cuts centered on the fixed-income operations for which Kengeter has been responsible since 2008, the people said.
Lack of demand in the banking industry means another round of dismissals is likely on Wall Street, permanently damaging careers of some investment bankers, Connelly said.
“People will have a while on the beach,” he said. “Their business has been commoditized to the point where their brains don’t count as much. A lot of investment bankers will have to find another way to make money.”