UBS to slash 8,700 jobs after feared $1.75B Q1 loss

UBS AG, Switzerland's largest bank, said today it expects a first quarter loss of nearly 2 billion Swiss francs ($1.75 billion) and announced plans to cut 8,700 jobs worldwide by the end of next year.
APR 15, 2009
UBS AG, Switzerland's largest bank, said today it expects a first quarter loss of nearly 2 billion Swiss francs ($1.75 billion) and announced plans to cut 8,700 jobs worldwide by the end of next year. The job cuts will hit the United States and Switzerland particularly hard because that is where the bank has its largest payrolls, a bank spokesman said. The bank said clients have continued to withdraw their money from the bank in the wake of its decision to cooperate more closely with foreign authorities over tax evasion. The company, which has been hard-hit by subprime-related losses, said it will "adapt its size to the changed market conditions and lower levels of business." It said it expects cost savings of 3.5 to 4 billion francs by the end of 2010 compared to 2008 levels. In prepared remarks for the annual shareholders meeting, new Chief Executive Oswald Gruebel said the bank knows where it has to set to work. "It will be a long road back to success without any quick fixes," said Gruebel. "Rather, we will move forward step by step in a rigorous and disciplined manner." Gruebel said the bank plans to cut 2,500 jobs in Switzerland, where more than one-third of the global staff is based. Spokesman Serge Steiner gave no breakdown by country but said the impact on the U.S. employees would also be heavy because that is another major center of UBS operations. The bank says 38 percent of its employees are in the Western Hemisphere. The areas to suffer the most cuts will be the so-called mid- and back offices — mostly support jobs without direct customer contact, said Steiner. Overall, UBS expects to cut its workforce to 67,500 in 2010 from 76,200 in 50 countries at the end of March. The bank, which already has suffered billions of dollars of losses over the past two years and received a bailout from the Swiss government, said it "estimates that it will report a loss attributable to shareholders of almost 2 billion francs in first quarter 2009." It said the shortfall is due mostly to losses of about 3.9 billion francs on previously disclosed bad investments, credit loss expenses and adjustment in values of toxic assets. The company's share price plunged as much as 8.7 percent in early trading on the Zurich exchange, before recovering somewhat to fall only 0.8 percent to 13.16 francs ($11.46). UBS said its wealth management and Swiss bank division recorded an outflow of net new money totaling 23 billion francs. That occurred mainly after the announcement of a settlement with U.S. authorities over their investigation into UBS's alleged assistance to wealthy Americans seeking to avoid paying U.S. taxes. At the same time it said its wealth management Americas unit recorded net new money of around 16 billion francs. The bank said it still expects to have a tier 1 capital ratio of about 10 percent at the end of the first quarter, and that it would continue to reduce risks and was conducting a review to decide which high-risk and unpromising businesses it will exit. UBS has been in a showdown with Washington over wealthy American tax evaders. It has provided U.S. investigators the bank details of up to 300 wealthy Americans suspected of tax fraud, but has refused to identify about 50,000 more U.S. account holders Washington wants. The Swiss bank has previously announced a $780 million fine and restitution package agreed with U.S. authorities to settle the tax evasion investigation. Full first-quarter results and other details about the bank's plans will be released May 5, it said.

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