UBS posts $1.75 billion loss; 8,700 jobs to go

UBS announced highlights of its upcoming first quarter results at its annual general meeting in Zurich yesterday, along with the news that 8,700 jobs are to be axed.

UBS estimates that it will report a loss of almost SFr2 billion ($1.75 billion) for the first quarter of 2009. The loss stems from a negative contribution totalling approximately SFr3.9 billion from "losses on illiquid risk positions, credit loss expenses and valuation adjustments on the last positions transferred to a fund controlled by the Swiss National Bank". UBS said that the outlook for its remaining risk positions has not changed materially.
    
UBS has been successful in ongoing efforts to shrink the size of its balance sheet and reduce risk-weighted assets and, despite the loss, its tier-1 capital at the end of March 2009 will be 10%.

However, assets under management in the private bank continue to drop and UBS says it has seen an overall outflow of net new money. The business division referred to as wealth management and Swiss Bank recorded a net outflow of approximately SFr23 billion. UBS said the outflow happened after it reached a settlement with US authorities regarding cross-border services for US private clients.

On February 18, UBS agreed to pay $780 million in fines, identify certain US clients and put an end to tax shelters in a settlement with US federal authorities over accusations that the bank helped nearly 17,000 Americans evade taxes. The first cases against former UBS clients for tax evasion have started to be heard in the US this week.

UBS highlighted that its wealth management business in the Americas attracted net new money of around SFr16 billion during the first quarter.

UBS is embarking on a cost-cutting programme designed to yield savings of between SFr3.5 billion and SFr4 billion by the end of 2010. And as expected by the market, a large round of job cuts is also forthcoming. UBS intends to reduce its headcount to 67,500 by 2010, from 76,200 currently. This means another 8,700 jobs, representing 11.4% of the current workforce, will be shed over the next year.

FinanceAsia reported on Wednesday that UBS is in the process of retrenching 240 people within wealth management in Asia-Pacific and that the downsizing is part of this larger picture of shrinking the employee base. UBS spokespersons in the region say they cannot comment on how many of the 8,700 job losses will be in Asia. In a written statement, UBS did not provide any clarity on regional impact, saying only that some of the job cuts will be in Switzerland.

UBS said it intends to continue to focus on "its core business -- international wealth management and the Swiss banking business -- alongside its global expertise in investment banking and asset management". But it clarified that it will exit high-risk and unpromising businesses, saying a review currently underway will enable it to decide which businesses it will remain active in and continue to grow, and which it will exit.

Detailed results for the Swiss bank will be announced on May 5. UBS's share price lost 6% on the Swiss Exchange yesterday to close at SFr12.47.