Swiss bank UBS announces massive layoffs of 10,000

Swiss bank UBS announces massive layoffs of 10,000 to shrink investment unit

Associated Press

GENEVA (AP) -- Swiss banking giant UBS AG announced massive layoffs Tuesday along with huge losses in its third-quarter results, saying it aims to trim as many as 10,000 employees, or some 15 percent of its staff, to drastically shrink its ailing investment bank.

Switzerland's biggest bank said that as part of the cost-cutting drive to boost profitability it "is likely to have a headcount of around 54,000" by 2015, down from its current 64,000 employees among 57 countries.

The bank posted a net profit loss of 2.17 billion Swiss francs ($2.31 billion), compared with a profit of 1.02 billion Swiss francs ($1.13 billion) during the same three-month period through September 2011.

In what it called "a significant acceleration" in its transformation, the Zurich-based bank said it would sharpen its focus on the investment bank and appoint a new executive, Andrea Orcel, formerly of Bank of America Corp., to lead it. The current co-head of the investment bank, Carsten Kengeter, is stepping down from the group's executive board to unwind the non-core assets.

UBS said it also plans to save 3.4 billion francs ($3.6 billion) in additional costs through 2015, but that the reorganization also will result in restructuring charges of 3.3 billion francs over the next three years including about a half-billion francs in the fourth quarter.

UBS CEO Sergio Ermotti said the investment unit, which has been hit by a series of costly blunders in recent years, will "continue to be a significant global player in its core businesses." But tighter industry-wide requirements for banks to increase their capital cushion also have hurt profitability as banks have less cash to invest. "It can't get better than this point for us to act," he told reporters.

The bank attributed the declining profit to a pretax impairment charge of 3.1 billion francs from goodwill and other non-financial assets with the investment bank along with a pretax charge of 863 million francs ($920 million) linked to an accounting rule on how banks must value their debt. Banks can post gains if the value of their debt falls, because it would theoretically become cheaper for the bank to repurchase that debt.

But the rule also says that when a bank's debt increases, it must take a write-down because it would theoretically have to pay more to buy back its own debt on the open market.

Ahead of the cuts, the value of UBS's stock rose 7.3 percent to close at 13.12 Swiss francs Monday on the Zurich exchange. Shares have risen 17 percent so far this year.

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