UBS AG may cut as many as 8,000 jobs as it grapples with the biggest credit writedowns of any European bank and a 12 billion Swiss franc (US$11.4 billion) first-quarter loss.
Switzerland’s biggest bank, which had a SF3 billion profit a year earlier, is set to spell out plans for layoffs when it reports detailed results today.
The company will probably say it’s eliminating between 2,500 and 3,000 jobs in its investment bank, more than 10 percent of the division, two people familiar with the matter said on Friday.
“UBS is scaling down investment banking,” including reducing trading bets and giving up off-balance sheet units, said Frankfurt-based Landsbanki Kepler analyst Dirk Becker, who advises clients to “reduce” holdings of UBS.
It is “realistic” to estimate that the company will fire one-tenth of its 83,000 employees overall, he said.
Writedowns at the Zurich-based bank after the US subprime mortgage meltdown have swelled to US$38 billion over the past three quarters, a result of building a debt securities business at the peak of the market. Chairman Marcel Ospel, who replaced half of the executive board since losses began last year, stepped down last month. UBS already cut 1,500 jobs late last year.
UBS rose SF0.20, or 0.5 percent, to SF37 francs by 9:01am in Swiss trading. It has lost 50 percent in the past 12 months, making it the fifth-worst performer in the Bloomberg Europe Banks and Financial Services Index of 59 stocks.
The Swiss bank got shareholder approval last month to raise SF15 billion in a rights offer after receiving SF13 billion from investors in Singapore and the Middle East in March.
“They’ve got to do something to win back the trust of shareholders,” said Peter Thorne, an analyst at Helvea in London who has an “accumulate” recommendation on the shares.
“I wouldn’t be surprised if it’s more” than 8,000 layoffs, he said.
New York-based spokesman Doug Morris declined to comment.
The world’s biggest financial companies have announced more than US$319 billion of writedowns and loan losses, with UBS in second place behind New York-based Citigroup Inc, which has written down US$41 billion.
Banks and securities firms have cut about 48,000 jobs in the past 10 months, including 15,200 positions at Citigroup and 5,220 at Merrill Lynch & Co.
Credit Suisse Group, Switzerland’s second-biggest bank, and Deutsche Bank AG, Germany’s biggest, reported quarterly losses for the first time in five years for the three months ended in March. Credit Suisse had a SF2.15 billion loss after SF5.3 billion in writedowns, while Deutsche Bank lost 131 million euros (US$204 million) after a 2.7 billion euro markdown.
UBS chief executive officer Marcel Rohner, 43, and newly elected chairman Peter Kurer, 58, told shareholders at the annual meeting last month that they plan to slim down the securities unit while focusing on maintaining the “core” wealth management franchise after Swiss clients pulled money in the first quarter.
Investment bank head Jerker Johansson, 51, a former Morgan Stanley banker who started in mid-March, inherited a division that contributed about 40 percent of UBS’ profit in 2006 before the credit-market freeze.
“UBS was among the last to participate in debt and they’ve had to pay a rather high price,” said Jan Leroy, a Brussels-based fund manager at Petercam Asset Management with more than US$29 billion in holdings.
“They should now focus on preventing collateral damage to their asset management and private banking business,” he said.
Investors, including Luqman Arnold, a former UBS president whose London-based investment group holds more than 1.1 percent of the bank’s shares, are demanding a split of the investment bank from other units.
While UBS has maintained a commitment to its so-called integrated bank model, Kurer told shareholders that he will examine its risks and rewards.
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