GENEVA (AP) — Swiss banking giant UBS AG is to cut as many as 10,000 employees, or some 15 percent of its staff, to drastically shrink its ailing investment bank.
The news of the layoffs came as Switzerland’s biggest bank posted another big loss for the third quarter. It said Tuesday that the job cuts are part of a strategy to shore up profits.
As a result, UBS said it needs to reduce its headcount to “around 54,000” by 2015, down from its current 64,000 employees in 57 countries.
Some 7,500 jobs are to be cut mainly in London and the United States, where UBS has a prominent building and trading operations in Stamford, Conn., near New York City. The other 2,500 cuts are to be in Switzerland.
Investors cheered the move, and the stock was trading 5 percent higher Tuesday in Zurich at 13.80 Swiss francs ($14.89). That’s on top of the 7.3 percent rise on Monday amid speculation over the cuts.
The announcement of the job cuts came as the Zurich-based bank posted a loss of 2.17 billion Swiss francs ($2.31 billion) in the third quarter, in contrast to last year’ equivalent net profit of 1.02 billion Swiss francs ($1.09 billion).
UBS blamed the loss on a 3.1 billion-franc ($3.33 billion) charge at the investment bank and an 863 million- franc ($926.09 million) hit linked to an accounting rule on how banks must value their debt.
Banks can post gains if the value of their debt falls, because it would theoretically become cheaper for the bank to repurchase that debt. But the rule also says that when a bank’s debt increases, it must take a write-down because it would theoretically have to pay more to buy back its own debt on the open market.
In what it called “a significant acceleration” in its transformation, the bank said it would sharpen its focus on the investment bank and appoint a new executive, Andrea Orcel, formerly of Bank of America Corp., to lead it. The current co-head of the investment bank, Carsten Kengeter, is stepping down from the group’s executive board to unwind the non-core assets.
UBS said it also plans to save 3.4 billion francs ($3.65 billion) in additional costs through 2015, but that the reorganization will result in restructuring charges of 3.3 billion francs ($3.54 billion) over the next three years including about a half-billion francs ($537 million) in the fourth quarter.
But tighter industry-wide requirements for banks to increase their capital cushion also have hurt profitability as banks have less cash to invest.
“It can’t get better than this point for us to act,” he told reporters.
Mr. Ermotti, who took over in November after the discovery of unauthorized trading last year, has been downsizing the investment bank to meet stricter capital requirements and shrinking profits largely because of Europe’s sovereign debt crisis.
Former UBS trader Kweku Adoboli has been facing trial in London this month on charges of committing fraud that cost the bank $2.3 billion. He has told the jury that the losses came after senior traders persuaded him to change from a bearish to a bullish point of view in July 2011.View Entire Story
By Jay Sekulow
The left's outrage over the IRS turns to a plea to 'move on'
Independent voices from the TWT Communities
News and opinion from a Millennial Urbanite with Southern sensibilities,
Politics and pop culture from the perspective of an independent hip-hop conservative
Positive propaganda for a nation in peril.
Al Maurer provides a common sense, conservatarian, Constitutional conservative perspective from the battleground state of Colorado
World's Ugliest Dog Contest
Spelling Bee finale
Marines train Afghan soldiers
Rolling Thunder 2013
Benghazi: The anatomy of a scandal