UBS is set to unveil a radical downsizing of its struggling investment bank next week in a move that will prompt the loss of up to 10,000 jobs across the Swiss banking group.
Switzerland's largest bank by assets will significantly shrink the trading side and complexity of its investment bank and as a consequence also cut thousands of jobs in its back office over the next few years, three people close to the situation said.
The job cuts will amount to almost a sixth of the bank's workforce of 63,500 at the end of June. They will not happen all at once and the precise number is still unclear as the exact impact on back-office functions has not yet been determined.
It comes on top of another – still ongoing – program announced last year to cut 3,500 jobs.
The move highlights how banks around the world are trying to adapt to a radically changed regulatory and market environment that has left them with lower returns and much higher capital needs for certain business areas and national subsidiaries.
The new strategy, hammered out in several executive board meetings in New York this week and set to be announced next Tuesday, will lead to the closure of a sizeable part of UBS's fixed-income trading operations and other capital-intensive areas of the investment bank.
It will also lead to changes among the senior management of the bank and will trigger a large reduction of complexity and costs in the bank's support functions such as its information technology department.
"There were several options on the table but UBS has decided on the most radical one," one person familiar with the plan said.
The plan was devised by Sergio Ermotti, who came in a chief executive last year in the wake of an alleged rogue trading scandal that left UBS with a $2.3 billion loss in the investment bank.
The restructuring is a drastic next step in a strategy unveiled almost a year ago by Ermotti to give UBS's often troubled investment bank a support role for the bank's market-leading wealth management.
The unit had brought the Swiss lender to its knees during the financial crisis, forcing UBS to retrench faster and earlier from the area than most of its rivals.
The investment bank has already been drastically trimmed in the past 12 months by Carsten Kengeter, who as chief executive of the unit cut its risk weighted assets by half and pushed through a retreat from a number of fixed income trading areas.
This summer, Ermotti brought in dealmaker Andrea Orcel to become co-head of the investment bank alongside Kengeter.
The cuts will be predominantly in Kengeter's realm of the investment bank. Kengeter is expected to stay at the bank although his future role at the group remained unclear.
UBS's investment bank is trailing far behind the 26 per cent return on allocated equity that the bank is achieving in core areas such as wealth and asset management.