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Business

Swiss bank UBS to slash over 8,000 jobs as losses mount

After struggling to recover from losing billions in the economic crisis, Switzerland's biggest bank, UBS, on Wednesday said it would slash 8,700 jobs in a bid to "make substantial cost savings" amid fresh losses.

The UBS Logo

UBS: trouble, writ large

The bank, seeking to "realize substantial cost savings in all areas" after posting losses for the first quarter of about two billion Swiss francs (1.32 billion euros, $1.75 billion), revealed that its latest job cull would help it trim costs by up to four billion francs.

"Major job cuts are unfortunately unavoidable. UBS expects to reduce the number of its employees to about 67,500 in 2010," said the bank, which employed 76,200 people at the end of March but which has slashed some 11,000 since October 2007.

Even as the bank downsizes, the bank's new chief executive, Oswald Gruebel, warned that UBS was not out of the woods.

"But you should not assume that this will bring about a marked improvement in our results as early as the next few quarters. Our outlook remains cautious and we face many uncertainties," he is expected to say in a speech to be delivered to shareholders during the bank's annual general meeting (AGM) later on Wednesday.

The bank said it has yet to stem an outflow of funds, as its net money outflow for the Wealth Management and Swiss Bank division reached some 23 billion Swiss francs.

"The outflow was mainly recorded after the announcement of the agreement in connection with the investigation into our cross-border activities for US clients," said Gruebel.

UBS still embroiled in damaging US tax case

The UBS logo seen under cloudy skies

The Swiss bank is still under a dark tax cloud in the US

One of the biggest challenges faced by UBS is in the United States, where the bank still faces a US government lawsuit to recover the details of some 52,000 US customers suspected of tax offences.

The bank was forced to pay $780 million to US justice authorities in February to settle other charges of assisting tax fraud.

Gruebel acknowledged recent attempts by countries including the US, Germany and France to clamp down on tax cheats, and said UBS was "under particularly close scrutiny in this regard."

"The operating conditions for cross-border wealth management will change, and this will affect how our clients act. We shall make sure that this does not catch us unprepared," he said.

Another problem facing the bank was the "extreme" pressure on high executive pay, according to the bank's nominated chairman Kaspar Villiger.

Pressure on salaries blunting competitive edge

An open post box with the Swiss flag on the front

When it comes to paying for the best, UBS finds the coffers empty

UBS was starting to lose out in recruiting the best as it trims costs, Villiger said in a draft of the speech he plans to deliver at Wednesday's AGM, during which his nomination is expected to be approved by shareholders. Salaries at UBS have "fallen more than the competition's," he said.

"But we're seeing increasing evidence that we're starting to lose our competitive edge with regard to recruiting the best of the best. This should be a message to those who think the bank should take more extreme measures," he added.

Public anger has mounted over bonuses paid to executives at failing firms, in particular companies that have had to be bailed out by the state.

UBS received a multi-billion-dollar state support package late last year - the only Swiss bank to need public aid.

Villiger, a former Swiss finance minister, said that "excessive salaries have angered me as well" and needed to come down to a "normal level."

But he argued that the bank operates in a "real environment" and needs the best people to tackle problems.

"If taxpayers want their money back, or even to make a profit on their investments, it is more important to have top-quality management than rock-bottom salaries," he said.

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