UBS to cut up to 5,500 jobs amidst financial turmoil

Swiss banking giant UBS, reporting huge losses in its sub-prime loan debacle, said on Tuesday it would cut up to 5,500 jobs within the next year which it forecast would be tough.

The bank posted a net loss of 11.5 billion Swiss francs (CHF) (Dh40.2bn) for the first quarter owing to its US sub-prime-related positions, as well as writedowns of CHF19bn.

The results were in line with a warning the bank issued in April saying it expected a net loss of about CHF12bn for the first three months of this year.

UBS, the biggest Swiss bank, is the bank hardest hit in the world by the sub-prime crisis, having made asset writedowns of $37bn. And it said on Tuesday that this year had begun with “tough business conditions” which it expected to continue.

“The impact will affect all of UBS's 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 by the year-end, most through redundancies.

Staff would also be trimmed in other departments, mainly through normal departures and internal redeployment, the bank said.

Assuming no change in market conditions, it expected to have 5,500 fewer employees by the middle of 2009.

The bank also said it had “substantially reduced its risk inventory”.

Positions related to US sub-prime mortgages had been cut by about 60 per cent compared to the figures for the third quarter of last year.

Chief executive Marcel Rohner said the group's exposure was still subject to market conditions, but “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 journalists on a telephone conference, although he declined to specify when exactly he expected the bank to return to profitability.

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 from its shareholders.

UBS shares fell by 3.85 per cent to CHF35.46 in early trading on the Zurich stock exchange. The overall SMI index was down 36.27 points to 7,621.99.

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