Switzerland's biggest but troubled bank UBS, said today that it would axe 8,700 jobs to save cost in the face of an expected first-quarter net loss of nearly $1.75 billion.
Struggling with sub-prime mortgage related losses as well as facing securities fraud and tax evasion lawsuits in the US, (See: New York attorney general charges UBS with securities fraud) the Swiss banker says it will adapt its size to the changed market conditions and lower levels of business.
Releasing details today, prior to the annual shareholders meeting, UBS said that it seeks to realise substantial cost savings in all areas by the end of 2010 of approximately 3.5 to 4 billion francs compared with 2008 levels and major job cuts are unfortunately unavoidable.
UBS said in a statement, ''UBS estimates that it will report a loss attributable to shareholders of almost CHF 2 billion in first quarter 2009. The loss stems from a negative contribution totaling roughly CHF 3.9 billion due to losses on previously disclosed illiquid risk positions, credit loss expenses and valuation adjustments on the last positions transferred to a fund controlled by the Swiss National Bank. The outlook for remaining risk positions has not changed materially.''
UBS expects to reduce the number of its employees to about 67,500 in 2010. At the end of March 2009 UBS employed 76,200 people in over 50 countries. Some of these job cuts will come from its home country in Switzerland.
The Swiss bank has axed 11,000 jobs since October 2007 with the last round of job cuts coming in February, when the bank announced that it would cut another 2,200 jobs at its investment-banking arm and restructures its wealth management operations as it reported a hefty 8.1 billion Swiss francs ($7 billion) fourth-quarter loss. (See: $27-billion Q4 loss compels UBS to slash 2,200 investment-banking positions)
Chief executive Oswald Gruebel, said in a speech to be delivered to shareholders during the bank's annual general meeting later today, ''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 added.
''You should not assume that this will bring about a marked improvement in our results as early as the next few quarters. Our outlook remains cautious and we face many uncertainties,'' he added.
The bank aims to maintain its core business – international wealth management and the Swiss banking business – alongside its global expertise in investment banking and asset management.
UBS was bailed out by the Swiss National Bank when it received $5.3 billion against mandatory convertible notes (See: Credit Suisse rescues itself, UBS gets funds infusion).
The Swiss National Bank announced the creation of a fund to enable UBS to transfer $60 billion worth of toxic assets from its balance sheet (See: UBS completes $38.7 billion transfer of toxic assets to state fund).
Apart from these losses, UBS is embroiled in lawsuits filed by the US government for facilitating tax evasion for its American customers through the use of offshore tax havens (See: US justice dept hauls UBS to court to force disclosures). Last month it said that it lost $1.2 billion more than declared earlier because of its settlement with US authorities under charges for facilitating tax evasion by its American customers through the use of offshore tax havens as well as a write-down on securities being transferred to the Swiss National Bank. (See: US tax-fraud settlement adds $1.2 billion more to UBS losses for 2008).
UBS has also been sued by the attorney general of New York, who accused it of consumer and securities fraud, saying the bank had misled investors when it sold them auction-rate securities. (See: UBS follows Citigroup to settle auction securities fraud)
According to charges laid by the attorney general Andrew Cuomo, seven UBS bankers, who have not been named, sold their personal holdings in the three months leading up to the collapse of the auction-rate securities market because they knew it was heading for a crisis. However, at the same time, the bank continued to market and sell tens of billions of dollars of the securities to its clients.