UBS (NYSE: UBS) Planning Job Cuts
Swiss Banking giant UBS (NYSE: UBS) has struggled to rebound since the financial crisis of 2008. Amidst a challenging environment, multiple news outlets are reporting that the firm is expected to cut up to 10,000 jobs, or 16 percent of its workforce, as it contends with shrinking revenue and rising capital requirements, a source familiar with the matter said. If true, a layoff of this scale would amount to be one of the largest layoffs by a bank since the financial crisis.
The cuts are not aimed at any one segment specifically, as the firm has largely underperformed across the board. The bulk of the losses are likely to occur in its hard-hit trading and investment banking areas. The cuts will accompany a restructuring that will lop off much of UBS’ massive fixed-income operations into a separate unit to be wound down over time, according to the Financial Times, which first reported the news. The bank has been withdrawing from the riskier and more capital-intensive parts of its business to meet tighter capital rules and a dearth of deals affecting the securities industry globally. It has said it will dedicate most of its resources to its wealth management, private banking and asset management businesses.
Andrea Orcel, who joined from Bank of America (NYSE: BAC) this year will run the equities, fixed income, foreign exchange and advisory businesses that will remain active, the paper said. UBS pledged last year to cut more than 5 percent of its workforce, or about 3,500 jobs. The new cuts are expected to supplement that target. UBS, which has more than 60,000 employees, is likely to provide details of the cutbacks when it reports its third-quarter results on October 30, the source said.
Sergio Ermotti, the 52-year-old chief executive who took the top job just 13 months ago is said to have engineered the cuts. The expected cuts will add to the tens of thousands of jobs the financial sector has shed globally since the crisis of 2008. In the United States alone, financial companies have announced plans to eliminate 28,000 jobs through the first nine months of this year, according to outplacement firm Challenger, Gray & Christmas. That compared with 54,000 job losses through the first nine months of 2011.
“I think we are still in the early innings of this,” said Nancy Bush, a veteran bank analyst and contributing editor at SNL Financial. “The whole structure of the financial services industry has got to change. We are in the meat cleaver stage right now.” Many of the large banks are shifting away from the high risk, capital intensive businesses. Shifting towards lower risk, less intensive businesses may hurt profit potential, but should return stability as well.