Swiss banking titan UBS has announced plans to cut 16 per cent of its 64,000 workforce to slim down its investment banking arm.
The restructuring is expected to deliver savings of up to SFr 5.4bn (£3.6bn) by 2015, with 7,500 layoffs expected across the bank’s bureaus in London and Stamford, Connecticut. The remaining 2,500 jobs are to be cut in Switzerland.
“The decision has been a difficult one, particularly in a business such as ours that is all about its people”, said UBS chief executive Sergio Ermotti.
The overhaul comes as UBS posts net third quarter losses of SFr 2.2bn (£1.4bn), compared to its net profit of SFr 1.02bn (£670m) for the equivalent period last year.
The loss was primarily attributable to a one-off payment of SFr 3.1bn (£2.06) related to its investment banking division and debt charges of up to SFr 863m (£575m).
Overall, the global financial crisis cost UBS SFr 39bn (£26bn), forcing the bank to seek a government bailout in 2008.
Furthermore, a series of costly misadventures by the bank’s investment arm has hemorrhaged profits and embroiled the bank in a number of embarrassing blunders, including the Libor scandal.
The appearance of rogue trader Kweku Adoboli in court today after losing UBS up £1.4bn last summer serves as a stark reminder of the risks posed by the bank’s investment arm.
As such, the bank's renewed focus on private banking and its smaller investment activities – advisory work, research, equities trading, precious metals, and foreign exchange – heralds a new direction for UBS as it sheds the sort of high-risk activities culpable for the bulk of the bank’s recent losses.
Markets responded positively to the news, with UBS shares rising by almost 6 per cent on Tuesday, following a 7 per cent increase on Monday.