UBS will cut 5,500 jobs in one the biggest purges seen so far in the financial markets crisis, as the Swiss wealth-management titan slashes its investment bank that plunged it into turmoil.
UBS also said it has a preliminary deal with US asset manager BlackRock to sell a $15 billion portfolio of sub-prime mortgages, in what the bank said was a signal the market for ailing US real-estate loans is recovering.
Shares in the group fell 5% as investors worried the crisis had ravaged UBS earnings power, as signaled by a sharp slowdown in new money entrusted to it by its large base of wealthy clients.
The latest 5,500 staff cuts come on top of 1,500 already completed and represent a reduction of 18% of total group headcount since mid 2007, the bank said.
The bank's CEO said the asset sale agreement with BlackRock offered light at the end of the tunnel in the market for risky mortgage assets.
UBS cautioned that conditions in financial markets were still tough, and it declined to offer any results forecast. But the group said it did not need to raise more capital beyond existing measures that total around 39 billion Swiss francs.
UBS reported a first-quarter loss of 11.535 billion Swiss francs, slightly better than it had announced in April and less than the 11.9 billion analysts expected.
But there were signs that the crisis was worrying wealthy clientele. The bank saw net inflows in its two wealth-management businesses of 5.6 billion francs in the quarter - a sharp decline and a trend one analyst described as 'alarming'.
UBS staff are among the first to feel the severe pinch of the credit crisis and many of those made redundant will enter a difficult jobs market.
Other casualties of the global markets crunch such as Citigroup are also making deep staff cuts. Even rivals which have escaped lightly, such as Goldman Sachs, want to slash headcount.
The UBS cuts mark a dramatic departure from only a year ago, when UBS still aimed to hold ranks with the world's largest investment banks.
UBS's new investment banking head, Jerker Johannson, said the layoffs would target weaker businesses, with some areas being cut by 50% and others, such as the municipal bonds unit, being sold or closed down. It is aiming to make a pretax profit at the investment bank of 4 billion francs when markets return to normal.
UBS is Europe's biggest casualty of the subprime crisis after posting over $37 billion in writedowns. Having already swept out senior management, the announcement marks the largest effort yet by the bank to reshape itself and face a downturn in the investment banking sector.
