Posted on 15 Apr 2009
Zurich-based UBS AG today said it expects to report a first-quarter net loss of nearly two billion Swiss francs ($1.76 billion) and said it will slash over 11% of its work force to reduce costs.
The bank said its net loss for the first three months was caused by roughly 3.9 billion francs in losses on illiquid securities, expenses for credit losses, and lower value of assets on the remaining positions transferred to the Swiss National Bank as part of a government shore-up.
Both the quarterly net loss and write-downs were wider than analysts had expected. Full earnings are scheduled May 5.
Under Chief Executive Oswald Grübel, who was installed about six weeks ago, UBS aims for cost savings of 3.5 billion francs to four billion francs by the end of 2010 over costs in 2008, when the bank spent 28.56 billion francs, which translates to cuts of up to 14%.
A large chunk of this will be achieved through 8,700 job cuts, with UBS expecting to reduce overall staff to 67,500 from 76,200 at the end of March. Home market Switzerland accounts for 2,500 of the jobs to go, with up to 1,500 formal layoffs "unavoidable," the bank said.
In an outlook from prepared remarks, Mr. Grübel said UBS remains cautious because the bank faces many uncertainties. "Markets remain extremely unstable, and we will not simply wait and hope for better times," Mr. Grübel is set to tell UBS shareholders, whom he faces for the first time later Wednesday.
Along with the first-quarter loss and job cuts, UBS said it saw withdrawals by wealthy private clients mainly after the bank in February agreed to pay $780 million and hand over client data to the U.S. to settle a tax evasion probe.
All told, net outflows at the private banking division -- called wealth management and Swiss bank -- tallied 23 billion francs for the quarter. The U.S.-based wealth management unit posted net inflows of 16 billion francs.
"The continued outflows in wealth management and Swiss bank were disappointing and will be a major focus of attention for the new CEO," said Peter Thorne, London-based analyst with independent brokerage Helvea. He rates UBS at "accumulate" with a 16.70-franc target.
UBS said its Tier 1 ratio -- a measure of capital strength -- will dip to roughly 10% at the end of March, from 11.5% at year-end.
In his remarks, Mr. Grübel also said UBS will stick with the so-called integrated model, meaning it will keep its investment bank and asset management units, alongside its private bank, which it considers core.
However, the unprofitable investment bank will continue to be cut back, with UBS exiting some, undisclosed locations. UBS will focus on strong positions it holds in areas such as equities and foreign exchange, while trading will be focused on business for clients.