UBS, the Swiss banking group, is shedding 3,500 jobs as part of a sweeping cost-cutting programme aimed at reshaping its business for a much tougher climate, particularly within its struggling investment banking division.
The cuts – announced on Tuesday and totalling about 5 per cent of UBS’s global workforce – were signalled in last month’s dismal second-quarter results, when chief executive Oswald Grübel scrapped a group profit target of SFr15bn.
Almost half of the reductions will be made in the investment bank as UBS focuses on developing its flagship wealth management arm in fast-growing markets, while scaling back efforts to rebuild sales and trading operations battered by the financial crisis.
In a separate announcement, the Swiss bank agreed to keep at least 2,000 jobs at its North American headquarters in Stamford, Connecticut. In exchange for the commitment, the state granted UBS a $20m loan to help defray the cost of upgrading the site’s infrastructure, training programmes and technology.
Similar to its counterparts, UBS’s revenues have fallen and its profits have been squeezed amid lower trading volumes, increasingly stringent regulatory requirements and consistently high costs. In recent weeks, banks including HSBC, Barclays and Goldman Sachs have slashed thousands of jobs in response to a much more difficult business environment than expected.
UBS, together with its rival Credit Suisse, have been further burdened by the strength of the Swiss franc, This has depressed the value of income streams from other countries and reduced fees from clients’ portfolios at its private bank, while the bulk of costs have remained in Switzerland.
Last month, Credit Suisse said it would cut about 2,000 jobs– or 4 per cent of its workforce – to reduce costs by SFr1bn from 2012.
UBS on Tuesday hinted that further reductions could still come. “The measures announced today are designed to improve operating efficiency. UBS will continue to be vigilant in managing its cost base while remaining committed to investing in growth areas,” it said.
The group said the latest measures were designed to reduce costs by SFr2bn ($2.5bn) a year by the end of 2013. About 45 per cent of the job losses will be made in the investment bank, while a third will come from the private banking business. A further 350 jobs will be trimmed in both asset management and the group’s independently run US wealth management business.
“Since UBS announced their SFr2bn cost saving initiative the economic environment has deteriorated even further, making these plans seem inadequate,” noted Peter Thorne of Helvea, the Swiss brokerage.
“Hopefully. UBS will be more active in [lowering] staff compensation levels than they have been so far.”
UBS said the cuts would trigger a SFr550m restructuring charge. Some SFr450m of that will be booked between now and the end of December, with “the substantial majority” of the total falling in the third quarter.
Additional reporting by Justin Baer in New York
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