UBS HAS confirmed the worst fears of investors as it unveiled an estimated loss of almost SFr2 billion (€1.3 billion) for the first quarter and a cull of more than 11 per cent of its workforce.
The figures, which were worse than market expectations, punctured growing optimism about a recovery in global banking stocks after this week’s better than forecast results from Goldman Sachs, and reminded investors of the considerable risks still confronting big banks in the credit crisis.
The results were delivered yesterday by the bank’s new chief executive, Oswald Grübel, the veteran Credit Suisse boss who emerged from retirement to run UBS just seven weeks ago.
UBS said it expected to lose about SFr3.9 billion (€2.58 million) through writedowns on remaining illiquid positions and credit losses.
The figure took its total writedowns to more than $50 billion (€37.8 billion) since the start of the credit crisis and included a final SFr300 million valuation adjustment on the SFr39 billion package of toxic assets transferred last year to the Swiss National Bank.
The expected loss would result in a 1 percentage point reduction in the bank’s Tier 1 capital ratio from the 11 per cent reported at the end of December.
The group signalled further big job cuts to adjust to reduced business, with 8,700 jobs to go by 2010. That would lower the total workforce to 67,500, down almost 16,000 from the early 2008 peak of more than 83,000.
Mr Grübel said the layoffs and other savings would lower costs by SFr3.5-4 billion by the end of next year, compared with 2008. He gave no details of which jobs would go, but warned that not even the core Swiss market would be spared. Although previous cuts had been focused on investment bankers in New York and London, about 2,500 jobs losses were expected in Switzerland this time.
“Unfortunately I am not able as yet to offer you any good news,” Mr Grübel told shareholders at UBS’s annual meeting. “Instead, I am forced to present you with another round of unsatisfactory performance figures and to announce further drastic measures.” He reaffirmed the company’s commitment to its three core businesses of private banking, investment banking and asset management, but clearly stressed the first of the three. “We see no reason to question the fundamental attractiveness of our integrated business model.”
The damage to the powerhouse private banking franchise from recent blows to the bank’s reputation was reflected in figures showing that customers had withdrawn a net SFr23 billion in the first quarter. The negative net new money came in spite of signs that UBS had staunched the massive outflows of 2008, triggered by concerns about the bank’s future and the impact of a damaging investigation by the US authorities into allegations that some private bankers had helped rich American clients evade taxes.
In other moves at yesterday’s meeting, shareholders approved the issue of new capital, prompting speculation that UBS might have to issue additional shares, in spite of its relatively strong capital ratios. The bank also announced that it had now clawed back about SFr80 million in bonuses from former senior executives – some SFr13 million more than previously revealed. – Copyright The Financial Times Limited 2009.
