ZURICH (Reuters) – UBS AG said on Friday it is cutting another 2,000 jobs at its troubled investment bank and closing most of its commodities business but will remain a universal bank and will not quit investment banking completely.
The news on Friday comes just a day after the world’s biggest wealth manager said it made a small profit in the third quarter after a year of losses, suggesting it had started to turn the corner even as the credit crisis engulfs other banks.
The 2,000 job losses come on top of 4,100 investment banking positions cut in the past year. Forays by the investment bank into risky assets like U.S. subprime mortgages have forced UBS to write down $42 billion — the most of any bank in Europe.
A spokeswoman said the job cuts would mostly fall in the United States and Britain, but also in Asia and Switzerland. They would be carried out “swiftly” and mostly through redundancies, with a target completion date of the year end.
The 2,000 new job cuts mean UBS will have reduced its investment banking workforce by about a quarter to 17,000 since peaking in the third quarter of 2007, while the bank will have cut its total headcount by more than 10 percent to under 80,000.
The latest move comes a week after Britain’s HSBC (HSBA.L) announced 1,100 investment banking job cuts and follow tens of thousands of job losses across the global financial industry, which is in its worst crisis since the Great Depression.
UBS’s shares were up 2.5 percent at 21.84 Swiss francs at 5:32 a.m. EDT, when the DJ Stoxx European banking sector index was up 1 percent, and extended Thursday’s rally on news that UBS expects a third-quarter profit.
However, the bank’s stock price is still down two thirds from a year ago, when it reported its first loss in nine years. It tumbled to 15.18 francs on September 16, its lowest level since listing in its current form in 1998, after Lehman Brothers collapsed.
“The revenue base in the investment bank is probably falling just as fast as the cost base given market conditions. We doubt that these cuts will be the last,” said Helvea’s Peter Thorne.
Chairman Peter Kurer launched a radical turnaround plan in August that involved separating UBS’s investment bank from its prized wealth management business and asset management, stoking speculation that it might seek to sell investment banking.
But Jerker Johansson, chief executive of UBS’s investment bank, suggested on Friday UBS might want to hang onto the business in a reduced form and stick to a “one-bank” model, much criticized before the current crisis felled many of its U.S. rivals.
“A right-sized investment bank, positioned alongside the world’s premier wealth management and leading institutional asset management business, will enable UBS to position itself as one of the core group of universal banks that are likely to dominate in this redrawn landscape,” he said.
Analysts at Wegelin & Co. said UBS might become an attractive takeover target after restructuring.
“However, critics … might say that today’s strategy announcement means that the chances for a sale of the investment bank have sunk and much points to the fact that the integrated bank business model should be maintained,” they said in a note.
But Helvea’s Thorne said a sale or joint venture for the investment bank was still possible, noting Kurer said his overhaul was aimed at creating “maximum strategic flexibility”.
UBS will remain in the precious metals business, where they are a leading player due to Switzerland’s long history of business particularly in gold and silver, a spokesman said.
The main commodities businesses UBS is exiting are areas like power, gas and oil trading, which the bank only built up in the last few years, while the equities business would stay active in commodities derivatives and index commodities.
Among banks trading commodities, UBS ranks in a second-tier group behind top players Goldman Sachs and Morgan Stanley.
The company withdrew from some continental European power and gas markets earlier this year but maintained power and gas operations elsewhere in northwest Europe, UK and North America. It also continued to trade in crude and refined products.
UBS said it will aim to maintain the strengths of its equities business in cash distribution, derivatives and prime services and seek further efficiency gains. It will also continue to provide investment bank clients with strategic advice and access to the capital markets.
It said it will cut back its real estate and securitization division and proprietary trading, while preserving its core foreign exchange, rates and credit businesses.
By Emma Thomasson
(Additional reporting by Sam Cage and Jason Rhodes; Editing by Erica Billingham, Greg Mahlich)