ZURICH, SWITZERLAND – The rumours have been swirling hard for five days, that Switzerland’s largest bank, UBS, would cut 10,000 jobs, more than 15 percent of its work force, and close its investment bank. Tuesday morning 30 October UBS clarified: it will indeed reduce its payroll to 54,000 jobs by 2015 from today’s 64,000 as part of efforts to increase profitability. The investment bank business will be scaled back substantially. Of the jobs to go, about 2,500 will be in Switzerland.
The news has been greeted by the financial world as a sign to investors that profitability at large banks is coming into sharper focus, and by banks as a sign that UBS may be showing the path to follow in order to meet tough new international capital requirements. The Financial Times cites an analyst, “‘The move is very much a positive – investors want UBS to reveal the value in UBS’s profitable asset and wealth management units and reduce the drag from its underperforming investment banking unit,’ said Huw Van Steenis, analyst at Morgan Stanley.”
UBS’s move appears to signal a groundshift in the financial world. “The overhaul … comes against the backdrop of far tougher regulation on riskier securities trading activities, and would represent a return to advisory roots stemming from UBS’s purchase of Warburg, a British merchant bank, in 1995,” reported NBC News as the announcement appeared imminent early Tuesday. “UBS stock rose sharply on Monday, with investors cheered by the prospect of the bank paying out to shareholders the capital freed up as a result of the overhaul.”
Specifically, the bank says:
- the staff cutbacks will save it CHF3.3 billion
- it will seek a return on equity of at least 15 percent starting in 2015; it previously set a broader range goal of 12-17 percent
- The Investment Bank will remain, with two core client segments: Corporate Client Solutions, advisory and execution businesses for corporate, financial institutions and sponsor clients, expected to generate around one-third of the Investment Bank’s revenues; Investor Client Services includes execution, distribution and trading for institutional investors that will provide support to UBS’s wealth management businesses
- the bank will “exit” a number of areas of business, without providing much detail, but it will reduce its “real estate footprint”, “simplify” its Corporate Center, “where excess management layers will be removed”, technology requirements will be “more focused” and the group will create a new “buying entity” for greater cost efficiency.