UBS, the biggest European casualty of the US sub-prime mortgage crisis, has said it is cutting back its investment banking business, reducing staff numbers and drastically lowering its exposure to risky investments.
The bank's CEO Marcel Rohner also said in a memo to staff that UBS would spin off its struggling mortgage-backed securities holdings into a separate division as part of a shake-up of its troubled investment bank.
Rohner said the bank was slashing staff in its property securitisation business by half.
The move showed that UBS is struggling to get to grips with its damaged investment banking business after it made disastrous investments in securities backed by US sub-prime mortgages.
These are in a state of meltdown after a growing number of borrowers with poor credit histories defaulted on loans, triggering a global credit crisis which has forced banks to take charges of more than $100 billion on their exposures.
It also highlighted that the crisis at the investment bank, which is being run by Rohner after the departure of its former head Huw Jenkins last year, is far from over.
Analysts said UBS appeared to be having trouble finding a high-profile replacement for Jenkins to take charge of the investment banking business, adding fuel to speculation about the division's future.
Rohner has said that investment banking is vital to the success of UBS's wealth management unit, the world's largest.
UBS said it was cutting proprietary trading - or the risky buying and selling of securities on the bank's own account - which played a large part in its sub-prime woes.
UBS's peers in investment banking, including Citigroup and Merrill Lynch, are also trying to restructure their business and have laid off thousands of staff.
UBS has taken charges of $14.5 billion on its exposures to US sub-prime mortgages and last month announced a massive capital injection from Singapore and an unidentified Middle East investor.
