UBS AG (UBS) is contemplating more layoffs in the European investment banking division, according to a Bloomberg report. The job cuts come as part of the company’s efforts to reorganize its business.
The layoffs are now likely to be in the equities and fixed income section as the company resizes its merger advisory business, according to the report. This would result in total job cuts of around 400. The layoffs represent around 10% of the division’s front office staff in the region.
Only last month, according to a Bloomberg report, around 80 to 90 jobs were planned to be slashed at UBS advisory division, which comprises equity and debt capital markets. The layoffs are expected to spill over to the trading business too.
The layoffs come as UBS faces a challenging operating environment in the region. The sovereign debt crisis has been a matter of concern and the company has resorted to such restructuring measures to address such issues. Notably, the company, which is trimming its securities division to refocus on its wealth management business, has already achieved its target of employee reductions it scheduled for the end of next year.
UBS, which is scheduled to report its earnings later this month, is not the only European firm that is overhauling its business. Amidst the stressed operating environment and stringent capital norms, other European firms are rightsizing their business to meet such challenges.
In the recent months, Deutsche Bank AG (DB) also announced its plans of revamping its business, which involves change in compensation practices, job cuts as well as asset sales. The company intends to lower annual costs by €4.5 billion ($5.8 billion) by 2015 and slash more than 1900 jobs, mainly in the investment banking division. Moreover, Royal Bank of Scotland Group Plc. (RBS) too has opted to make layoffs to address such issues.
Given the stressed operating environment, we believe any significant improvement in earnings of UBS in the upcoming quarters would remain elusive. However, prudent business model changes can lead to improvement in efficiency and bolster its competitive edge.
UBS currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
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