UBS confirmed investors’ worst fears on Wednesday as it unveiled an estimated loss of almost SFr2bn ($1.75bn) for the first quarter and a cull of more than 11 per cent of its workforce.

The figures, worse than market expectations, punctured growing optimism about a recovery in global banking stocks after this week’s better results than forecast from Goldman Sachs, and reminded investors of the considerable risks still confronting big banks in the credit crisis.

The results were delivered by the bank’s new chief executive, Oswald Grübel, the veteran Credit Suisse boss who emerged from retirement to run UBS just seven weeks ago.

UBS said it expected to lose about SFr3.9bn through writedowns on remaining illiquid positions and credit losses.

The figure took its total writedowns to more than $50bn since the start of the credit crisis and included a final SFr300m valuation adjustment on the SFr39bn package of toxic assets transferred last year to the Swiss National Bank.

The expected loss would result in a 1 percentage point reduction in the bank’s Tier 1 capital ratio from the 11 per cent reported at the end of December.

Ashmore link

UBS is linking up with Ashmore Investment Management to start a fund investing in distressed emerging market assets, writes Adrian Cox in London.

The Swiss bank will seed the Ashmore Global Consolidation and Recovery fund with $100m of its own assets, mostly Asian bonds and loans.

It aims to benefit from offloading toxic assets by pooling them with those of other investors for at least five years. It will also earn fees from encouraging clients such as banks and insurance companies to contribute their own assets or capital to the fund.

Although UBS is one of the banks worst hit by writedowns from the financial crisis, the plan would relate to only a fraction of its bad assets. The bank transferred the securities to Ashmore in return for an equity stake in the fund, unlike when it sold $15bn of mortgage- backed securities outright to BlackRock a year ago.

UBS helped finance most of the purchase by the US fund manager.

The group signalled further big job cuts to adjust to reduced business, with 8,700 jobs to go by 2010. That would lower the total workforce to 67,500 – down almost 16,000 from the early 2008 peak of more than 83,000.

Mr Grübel said the layoffs and other savings would lower costs by SFr3.5-4bn by the end of next year, compared with 2008.

He gave no details of which jobs would go, but warned not even the core Swiss market would be spared.

Although previous cuts had been focused on investment bankers in New York and London, about 2,500 jobs losses were expected in Switzerland this time.

Mr Grübel told shareholders at UBS’s annual meeting: “Unfortunately I am not able – as yet – to offer you any good news. Instead I am forced to present you with another round of unsatisfactory performance figures and to announce further drastic measures”.

He reaffirmed the company’s commitment to its three core businesses of private banking, investment banking and asset management, but clearly stressed the first of the three. “We see no reason to question the fundamental attractiveness of our integrated business model,” he said.

But the damage to the powerhouse private banking franchise from recent blows to the bank’s reputation was reflected in figures showing customers had withdrawn a net SFr23bn in the first quarter.

The negative net new money came in spite of signs that UBS had staunched the massive outflows of 2008 triggered by concerns about the bank’s future and the impact of a damaging investigation by the US authorities into allegations that some private bankers had helped rich American clients evade taxes.

In other moves at the meeting, shareholders approved the issue of new capital, prompting speculation that UBS might have to issue additional shares, in spite of its relatively strong capital ratios. The bank also announced that it had now clawed back about SFr80m in bonuses from former senior executives – some SFr13m more than previously revealed – though no details were given for which executives had been affected. The bank’s shares closed down 6.9 per cent at SFr12.36.