ZURICH, Switzerland – Swiss banking giant UBS announced nearly 10,000 job cuts worldwide on Tuesday, October 30, saying that the costs of restructuring its hard-hit investment bank had pushed it deep into loss in the third quarter.
The costs switched the Swiss bank’s third-quarter results into a 2.2-billion Swiss franc net loss compared to the 1.0 billion net profit it had reported during the July-September period last year.
“This decision has been a difficult one, particularly in a business such as ours that is all about its people,” UBS chief executive Sergio Ermotti said in a statement, referring to the towering number of job cuts.
Traders welcomed the news of the restructuring, which had been widely rumored since the weekend, pushing up the shares 6.7% in early dealing. The over all Swiss market was showing a gain of 0.35%.
The Zurich-based bank said that cuts in its overall staff numbers to about 54,000 by 2015 was a necessary part of a restructuring of its investment bank.
The restructuring included shedding some of its high-risk activities and basically withdrawing from the fixed income business which had burdened it with catastrophic losses during the 2008 “subprime” crisis.
UBS’s investment bank has been struggling to get back on its feet ever since, but has run into a number of stumbling blocks along the way, like its London trader Kweku Adoboli who was revealed last year to have gambled away $2.3 billion (1.78 billion euros) of the bank’s money.
UBS, like other Swiss banks, has also faced rising pressure over the country’s cherished bank secrecy laws amid a tightening of international banking regulations.
The bank, which counted 63,745 employees at the end of September, said Tuesday the restructuring would save 5.4 billion Swiss francs (4.5 billion euros, $5.8 billion) over the next three years.
UBS, which had already announced 5,500 job cuts last year, did not specify where it would make the deepest cuts this time, but its businesses in the United States and Britain were reportedly to be the hardest hit.
Swiss news agency ATS meanwhile reported that about 2,500 cuts would occur in Switzerland.
The bank said in its earning statement Tuesday it had taken a one-time charge of 3.1 billion Swiss francs linked to goodwill impairments and a charge of 863 million related to a significant tightening of the bank’s credit spreads over the quarter.
Before taxes, UBS said it was hit by a loss of 2.5 billion Swiss francs, but that adjusted for the impairment losses and a restructuring provision, it had registered a pre-tax profit of 1.4 billion.
Ermotti hailed the company’s earnings, stressing that all the bank’s activities had “delivered improved profitability in the third quarter,” and that it was rolling out its strategy “well ahead of schedule.”
UBS finance chief Tom Naratil meanwhile told a conference call on Tuesday that the bank had “delivered a solid performance despite a challenging environment.”
The bank nonetheless expected to have to pay a further amount of about 500 million Swiss francs in restructuring charges in the fourth quarter, which is also expected to be in the red.
But Naratil stressed that despite the difficult economic environment, the bank had managed to raise a “record” amount of fresh capital, raising 7.7 billion Swiss francs from the Asia Pacific region, emerging markets and very wealthy clients.
In the fourth quarter, the bank said it expected to pull in more fresh capital despite the continued difficult climate.
As for dividend payments, which UBS started doing again last year after a four-year freeze, Naratil said “we continue to accrue for a dividend” in 2012, but did not specify if the bank would hand out some of its profits this year to shareholders. – Agence France-Presse
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