Troubled Swiss banking group UBS said Tuesday that it will cut another 2,200 jobs at its investment-banking arm and restructure its wealth management operations as it reported a hefty 8.1 billion Swiss francs ($7 billion) fourth-quarter loss. UBS said the result was largely due to a 7.5 billion Swiss franc loss in its investment banking business, which suffered from trading losses, further write-downs on its exposure to bond insurers and impairment charges taken against its leveraged finance commitments.
The bank made Swiss corporate history by losing record 19.7 billion Swiss francs after running up a further net loss of 8.1 billion Swiss francs in the final quarter of last year, including 3.7 billion Swiss francs in exposures to toxic assets. It has scrapped the dividend. (See: UBS announces fresh $19 billion loss; Deutsche Bank loses additional $3.9 billion)
Confirming it had cut bonuses by 85 per cent, UBS said it planned to reduce staff at the investment bank to 15,000 by the end of this year, after shedding more than 1,700 in the last three months of 2008 alone. This means almost 2,200 staff will leave as the investment banking arm is cut back even further. It has shed 5,500 jobs in the last 15 months and Jerker Johansson, its head, indicated more could go. But it has taken on 400 client advisers in the US.
Marcel Rohner, UBS CEO, told journalists the bank had cut bonuses to the "bare minimum". They declined from 7.9 billion Swiss francs to 1.16 billion Swiss francs, with the bulk made up of contractual payments. UBS has radically altered its remuneration model, with any bonuses paid deferred for up to four years - and clawed back if losses are incurred.
Profit was down around 40 per cent at the wealth management business, which looks after the group's rich clients, as the bank reported further outflows of cash. Clients withdrew a total of 85.8 billion Swiss francs from the group in the fourth quarter, including 58.2 billion Swiss francs from the wealth management business and business banking operation and 27.6 billion Swiss francs from the asset management side of the business.
The chairman, Peter Kurer, however said both the divisions had seen net inflows last month and insisted that the board was showing its "willingness to further invest in our industry-leading global wealth management business." John Cryan, CFO, added that January had been very encouraging.
The investment bank would, Kurer added, retain the board's full commitment - despite continuing investor pressure to divest it completely. But today's figures showed it dragged down the overall bank, making losses on trading, exposure to monoline insurers and leveraged finance.
Switzerland's biggest bank has been bailed out by the authorities, with the central bank, the Swiss National Bank (SNB), taking over most of its remaining toxic assets - at a cost to UBS last quarter of more than 4 billion Swiss francs. The central bank has offloaded more than a third of the $60 billion in UBS assets it originally took on onto the bank's balance sheet, reducing its own exposure to $39 billion. (See: Credit Suisse rescues itself, UBS gets funds infusion)
Giving an ultra-cautious outlook, it said market conditions remained "fragile" and it would further cut risks, assets and costs and Rohner indicated it still intended being profitable this year. The equity-trading portfolio has been slashed by a further 20 per cent while the bank has taken on more of the toxic assets than planned under its bailout by the SNB.
UBS is also looking at restructuring its operations. In the wealth management business it will split operations into two new divisions, Wealth Management & Swiss Bank and Wealth Management Americas.
"The formation of the two new divisions will help to re-build our reputation and recognition. Management will focus on their specific strategic challenges which, among others, are changes in client behavior, new market dynamics and a tight regulatory environment," said the CEO in a statement.
As well as facing massive write-downs over the last year, UBS has been embroiled in an investigation into alleged tax avoidance by some of its US customers. While the investment banking side of the business is being progressively reduced, UBS said its board remains committed to each of its business divisions. (See: UBS exits offshore business in US)