UBS will cut as many as 10,000 jobs to ease costs

Investment banking operations to shrink in risk-reduction effort

UBS’s pullback in investment banking follows recent scandals that have engulfed that division.
Walter Bieri/European Pressphoto Agency
UBS’s pullback in investment banking follows recent scandals that have engulfed that division.

LONDON — The Swiss bank UBS announced plans Tuesday to eliminate up to 10,000 jobs and cut costs in a major overhaul.

UBS posted a loss of $2.3 billion for the three months ended Sept. 30, citing restructuring costs and charges connected to its debt. The bank recorded a profit a year earlier.

UBS has two Boston offices, one downtown and one in the Back Bay, and eight other offices in Massachusetts, from Springfield to Hyannis. The company has not said how many workers will be affected in Massachusetts.


Like many other European banks, UBS is dealing with fallout from the sovereign debt crisis and the sluggish European economy.

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With profits eroding, UBS is moving to trim its riskier operations and focus on its profitable wealth management group.

The pullback in investment banking follows recent scandals that have engulfed the division. The group suffered a $2.3 billion trading loss connected to the activities of former trader Kweku M. Adoboli. It also faces an investigation related to the London interbank offered rate, or Libor.

The latest cutbacks build on an effort enacted nearly a year ago by chief executive Sergio P. Ermotti.

The investment bank will bear the brunt of the cuts. Over the next two years, UBS said, it will reduce its workforce by as much as 16 percent, bringing the total worldwide to 54,000 employees. Last year, the bank announced a separate batch of 3,500 job cuts.


‘‘This decision has been a difficult one,’’ Ermotti said in a statement. ‘‘Some reductions will result from natural attrition, and we will take whatever measures we can to mitigate the overall effect.’’

The job losses will be most pronounced in London, where the Swiss bank has a sizable investment banking operation. Ermotti said up to 45 percent of the layoffs, or 4,500 people, would be in the British capital. A further 2,500 job losses would come from its Swiss operations.

The layoffs are part of a broader plan to cut costs. The latest moves will help reduce expenses by $3.6 billion by 2015. Added to the bank’s previous efforts, UBS expects annual cost savings of nearly $5.8 billion over that period.

“We would expect this to kick off further industry restructuring,’’ said Kinner Lakhani, a banking analyst at Citigroup in London.

The bank’s stock is up 17 percent so far this year.


The bank said the cost savings would come primarily from its diminished investment banking operations, where the bank plans to eliminate most of its fixed-income businesses because they had become unprofitable.

The smaller investment banking unit would focus on advisory services, research, equities, foreign exchange, and precious metals, UBS said.

Andrea Orcel, who joined UBS last year from Bank of America, will lead the smaller investment banking division, while Carsten Kengeter, the current co-head of the unit, will step down from UBS’s executive board to oversee the sale of the bank’s unprofitable investment banking businesses and financial positions.

By shrinking the investment bank, UBS should help improve its capital position.

The restructuring efforts have been a blow to earnings.

In the latest quarter, UBS said it had incurred a loss of $3.3 billion related to its investment banking business, as well as a loss of $925.6 million connected to charges on the value of its debt.

The firm expects to book a charge of $536.3 million in the fourth quarter, which would lead to a net loss for that period.

The bank faces other headwinds, however.

In the latest quarter, pretax profit for its wealth management unit fell 32 percent, to $643.6 million, compared with the period a year earlier.

The loss in its investment banking unit soared to $3.1 billion from a loss of $697.2 million in the third quarter of 2011, while pretax profit in its retail and corporate unit fell 40 percent, to $438.7 million.

UBS warned that clients may remain cautious in the face of Europe’s debt crisis and the volatility in global financial markets.

“Failure to make progress on these key issues would make further improvements in prevailing market conditions unlikely and would thus generate headwinds for revenue growth, net interest margins and net new money,’’ UBS said.