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UBS axes 10,000 jobs as investment banking arm decimated

One of Switzerland’s biggest banks UBS is to cut 10,000 jobs worldwide, it revealed as announced its Q3 results. The job losses are part of an accelerated plan to drastically slim down UBS’ global investment banking operations, centred in London, and will be implemented over the next three years, cutting 16% from its current 64,000 payroll. The bank had already revealed in the summer that 3,500 jobs would go from its London offices.

With the announcement of its plan UBS has now confirmed that it is exiting the fixed income business in London and a slimmed down investment bank is its future. A unit that focuses solely on equities, foreign exchange (FX) trading, corporate advice and metals/commodities trading, headed up by ex-Bank of America big-wig, Andrea Orcel, is being introduced under the new proposals.

According to reports, UBS stopped dozens of fixed income traders from entering its London offices when they arrived for work on 30 October.

UBS lost 39bn Swiss francs ($42bn) during the financial crisis in 2008 and was one of the worse hit banks, requiring it to be bailed out by the Swiss authorities. It has also been hit by the rogue trading activities of Kweku Adoboli, an ex-City of London trader whose is currently on trial in London for his allegedly unauthorised trades which cost the bank $2.3bn last year. The London office where Adoboli used to work will likely feel the full force of the planned job losses, in addiiton to the positions already lost there.

UBS explained that 2,000 front office investment bank positions will be shed as part of the programme, with 2,500 jobs going in Switzerland and the US, with the remainder from the UK. Seeing as London is where the closed fixed income business was based, it is a fair assumption that there will not be a lot of traders hanging around the offices in Broadgate Arena, near Liverpool Street station, in the future.

The latest job cuts are aimed at saving CHF3.4bn ($3.6) over three years. UBS chief executive Sergio Ermotti said: "This decision has been a difficult one, particularly in a business such as ours that is all about its people. Some reductions will result from natural attrition and we will take whatever measures we can to mitigate the overall effect."

As part of the strategy to get out of investment banking in a big way, Zurich-based UBS will instead focus more on its private banking business and safer investment banking activities, away from much of the London-based trades that caused it to have to go cap in hand to the Swiss government for a bailout during the financial crisis of 2008.

Outlining the restructuring plan in a letter to shareholders, UBS’ chairman Axel Weber and chief executive Ermotti, said: "We will no longer operate to any significant extent in businesses where risk-adjusted returns cannot meet their cost of capital."

UBS’ full Q3 results, announced at the same time as its restructuring plan, showed while many units of the bank were profitable, a net loss of CHF2.17bn ($2.19bn) for July to September 2012 had been recorded due to exceptional charges. This compares with a profit of CHF1bn last year. The change-around is mainly being blamed on an impairment charge of CHF3.1bn that the bank says it is taking in order to cut its investment banking arm and to improve its capital ratios ahead of the Basel III capital adequacy rules. A pre-tax profit figure of CHF1.4bn was recorded before the exceptions came into play. In other words, UBS would have been in profit if it didn’t have to cover the losses from Adoboli, tax, Basel III and from the planned redundancies. No wonder it wants to get out of investment banking.

By Neil Ainger