Tuesday May 6, 04:49 PM
UBS to cut up to 5,500 more jobs
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ZURICH (AFP) - Swiss banking giant UBS (Virt-X: UBSN.VX - news) said on Tuesday it could cut up to 5,500 more jobs within the next year as it struggles to recover after wracking up huge losses in the US subprime home loan crisis.
UBS, the worst-hit bank which has been forced to take massive writedowns due to the crisis, said its net loss for the first three months of the year was 11.54 billion Swiss francs (7.08 billion euros, 10.97 billion dollars).
Writedowns for the quarter were 19 billion Swiss francs, in line with a warning issued by the bank in April when it also said its net loss would be about 12 billion Swiss francs.
However, the notable lack of fresh writedowns beyond the 37 billion dollars UBS had previously announced led some analysts to comment that the "worst may be over" for the bank and indeed, the banking sector.
Bank Wegelin analysts said investors were probably relieved that the results were in line with the earlier warning and that no new writedowns were announced.
While it described UBS' situation as still far from rosy, it added: "It is true for UBS as it is for the whole sector: the worst is probably over."
UBS said on Tuesday the year had begun with "tough business conditions" which it expected to continue.
"The impact will affect all of UBS' businesses and it requires the firm to manage costs, resources and capacity very actively," the bank said.
It said it would cut 2,600 jobs from its investment bank unit -- the main culprit for the subprime-related losses -- by the year-end, most through redundancies.
Staff would also be trimmed in other departments, mainly through normal departures and internal redeployment.
Assuming no change in market conditions, it expected to have 5,500 fewer employees by the middle of 2009.
The bank (NASDAQ: TBHS - news) last year announced some 1,500 job cuts by the end of 2007.
UBS also said it had "substantially reduced its risk inventory," with positions related to US subprime mortgages down by about 60 percent compared to the third quarter of last year.
Chief executive Marcel Rohner also confirmed a report that the bank was selling some of its subprime mortgage debt to US asset manager BlackRock (NYSE: BLK - news) for 15 billion dollars.
He did not give further details about the transaction, but according to a Financial Times report, the debt was bought at a 25 percent discount to its face value of 20 billion dollars.
It would in turn be packaged into a BlackRock fund and sold to investors. UBS would retain a minority interest in the fund and could thereby profit from a recovery in the future, according to the FT report which cited anonymous sources.
Rohner said "we see market demand for these securities returning in certain areas and at the current level of valuations."
UBS "will get over these difficulties in the coming quarters," Rohner assured reporters in a telephone conference call, although he declined to specify when exactly he expected the bank to return to profitability.
He added that the bank did not need fresh capital.
UBS has had to seek fresh capital twice, once from a Singapore sovereign wealth fund and an anonymous Middle Eastern investor, and a second time last month from its shareholders.
UBS shares fell 5 percent to 35.02 Swiss francs on the Zurich stock exchange in late afternoon trade. The overall SMI index was down 1.3 percent.
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