Switzerland’s largest bank UBS, which is mired in a whirlpool of financial problems, today announced plans to cut over 8000 jobs because of additional losses of $1.8 billion during the first-quarter.
In addition to the drastic reduction of workforce it carried out last year, UBS will also exit from its high-voltage banking activities by cutting down staff all over the world.
Though it is not clear how many UBS employees will lose their jobs in India, the latest plan will have an impact on the bank’s overall Indian operations, analysts said.
Faced with a “precarious situation” in which rich clients withdrew over $20 billion from the main wealth management portfolio, UBS is left with no other option but to downsize its staff, which is “unfortunately unavoidable,” the bank’s new chief executive Oswald Grubel informed about 5,000 agitated UBS investors today.
“I am forced to present you with another round of unsatisfactory performance figures and to announce further drastic measures,” he said, suggesting that the immediate short-term does not look healthy for the bank.
Having already suffered the largest credit writedowns in the European banking industry, UBS is unable to overcome the storm that started with the sub-prime mortgage crisis in 2007.
At a time when there seems to be some tentative turnaround in other European banks, like Credit Suisse and Deutsche Bank as well as the reporting of profits by US-based Goldman Sachs, UBS continues to be pulled down by one loss or the other, analysts said.
Unveiling fresh plans to save the bank from the financial meltdown, Oswald Grubel said the bank is expected to save over $3.5 billion from the proposed restructuring by the end of the year.
“We have to prepare ourselves for this even though we are entitled to be very optimistic about the long-term prospects for our bank,” he said.
UBS, which is facing several legal challenges in the US courts following its admission of luring rich American clients in a tax evasion scheme, expects to slash its workforce to 67,500 in 2010. Till last month, UBS had over 76,200 in over 50 countries on its rolls. The workforce has shrunk by almost a fifth from a peak of 83,800 last year.
Consequently, the bank is expected to vacate some “high-risk” areas of banking activities and capital market locations.
It intends to continue with operations in wealth management and Swiss banking as well as asset management and investment banking, the UBS chief said.
Further, the bank would make big cuts in marketing, sponsorship and use of external consultants, and also cancel employee benefits.
The Swiss National Bank had rescued UBS last October when it created a special vehicle to absorb UBS’ toxic assets, which are estimated at about $40 billion.
There are “no quick fixes,” said Gruebel, suggesting that “...markets remain extremely unstable. That’s why we are acting today by rigorously adjusting the size of our bank and cutting costs significantly once again.”
