UBS to scale down fixed income operations, lay off 10,000 jobs

Strategy aimed at making bank a leaner outfit

UBS unveiled plans on Tuesday to wind down its fixed income business and fire 10,000 bankers, as it adapts to tougher capital rules that make it more difficult for investment banks to turn a profit since the financial crisis. Zurich-based UBS will focus on its private bank and a smaller investment bank, ditching much of the trading business that ran up $50 billion in losses in the financial crisis, as well as a $2.3 billion hit from trader Kweku Adoboli last year, now on trial on charges of fraud and false accounting.

Chief Executive Sergio Ermotti is leading the three-year overhaul, which is aimed at saving 3.4 billion Swiss francs ($3.6 billion), on top of existing spending cuts of 2 billion francs. Former investment bank co-head Carsten Kengeter will lead the isolation and winding down of its fixed-income activities that are no longer profitable.

The remaining investment bank—equities, foreign exchange trading, corporate advice, and precious metals trading—will be run by Andrea Orcel, a recent Ermotti hire from Bank of America who had co-ran the unit with Kengeter until Tuesday.

"This decision has been hard but it is necessary to create a UBS that is fit for the future," Ermotti said. "The business model we are creating will be unique in the banking industry." The measures translate to a 15% staff cut, taking UBS's overall staff to 54,000 from 63,745 now, already down from the 2007 peak of 83,500 as banks have shed tens of thousands of jobs globally since the financial crisis of 2008.

"Of the job cuts, 2,000 will be front-office investment banking staff, the revenue generators. About 2,500 positions will go in Switzerland, slightly more than that in the US, and the rest in Britain," Ermotti said.

A smaller investment bank will leave UBS focused on its private bank, which looks after the affairs of the wealthy. With 1.6 trillion francs in assets, it is the second-largest operation of its kind in the world after Bank of America.

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