UBS Cuts 10,000 Jobs as it Exits Fixed Income Business

Swiss bank UBS confirmed plans to cut 10,000 jobs worldwide and wind down its fixed income business, as part of a three-year programme aimed at achieving cost savings of Swiss francs (CHF)3.4bn, on top of existing spending cuts of CHF2bn.

The job losses reflect an accelerated plan to drastically slim down UBS’ global investment banking operations, centred in London, which will result in a 16% reduction from its current 64,000 payroll and compares with a peak of 83,500 employed back in 2007. The bank had already revealed in the summer that 3,500 jobs would go from its London offices.

According to reports, UBS stopped dozens of fixed income traders from entering its London offices when they arrived for work on 30 October.

“This decision has been hard but it is necessary to create a UBS that is fit for the future,” said UBS’ chief executive officer (CEO), Sergio Ermotti. “The business model we are creating will be unique in the banking industry.”

He added that the 10,000 redundancies would be made up of 2,000 front office investment banking staff, with a further 2,500 positions to be shed in Switzerland, a slightly higher figure in the US and the remainder in the UK.

Outlining the restructuring plan in a letter to shareholders, Ermotti and UBS’ chairman, Axel Weber, wrote: “We will no longer operate to any significant extent in businesses where risk-adjusted returns cannot meet their cost of capital.”

UBS will now focus on its private bank and a smaller investment bank, ditching much of the trading business that ran up US$50bn in losses in the financial crisis, as well as a US$2.3bn hit from the activities of rogue trader Kweku Adoboli, now on trial on charges of fraud and false accounting. The activities of Adoboli, who worked on the bank’s London-based exchange-traded funds (ETFs) desk, came to light in September 2011.

Previously, the bank was obliged to accept a government bailout in 2008 after more than US$50bn in mortgage losses, and in February 2009 it paid US$780m in penalties to settle a US tax probe.

The latest announcement coincides with UBS reporting a Q3 net loss of CHF2.172bn, resulting from the restructuring charges and CHF863m written off the value of its own debt.

UBS aims to reduce its risk-weighted assets to below CHF200bn by the end of 2017, against a current figure of CHF301bn. Of this figure, the investment bank will account for around CHF70bn, or less than half of what it accounts for at present.

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