UBS Seen Slashing Jobs with Big Quarterly Loss


UBS shares rose over 5 percent on Friday on hopes the ailing Swiss bank will unveil job cuts next week to reverse breakneck expansion into investment banking which made it Europe's worst subprime victim.

Investors believe the bad news belongs mostly in the past after UBS said in April that it would post 12 billion Swiss francs ($11.5 billion) in losses for the first quarter, raising its total subprime writedowns to around $37 billion.

The bank now needs to fill in the blanks in its restructuring plans, which include paring back its investment bank, restoring its reputation and managing its remaining exposure to investments damaged by the financial crisis.

"UBS, it would seem, still has many issues to resolve," analysts at brokerage Fox-Pitt Kelton said in a note to clients.

UBS is expected to slash around 10 percent of its investment banking workforce of 22,000, and will be looked to for an update on the state of the "workout" division which harbors the group's ailing or illiquid assets.

The crisis ripped a gaping hole in UBS' balance sheet and exposed widespread weaknesses in strategy, risk control and management culture.

The bank has since pared its ambitions and swept out most senior management.

But pressure remains on UBS to do more, with activist investor group Olivant scoffing at UBS' choice of lawyer Peter Kurer as its new chairman, and calling on the bank to consider selling off its investment bank.

Chief Executive Marcel Rohner has proven himself a capable crisis manager since taking the helm after the subprime crisis first hit last year.

He now needs to demonstrate his skills as a turnround specialist if he wishes to minimize any lasting damage and capitalize on UBS' position as the world's largest wealth manager, focusing on services for rich clients.

Rohner said in mid-April that the worst was behind it and that the bank was preparing to announce job cuts that were unlikely to exceed 3,000 to 4,000 in its investment bank, which was the source of the losses.

UBS shares have risen around 30 percent in the past month, compared to a rise of roughly 3.5 percent in the Dow Jones European Stock index, making it Europe's biggest gainer as confidence gradually returns to the financial markets.