) is likely to cut 2,000-3,000 jobs in addition to the 10,000
layoffs announced in October 2012, according to a Bloomberg
report. The job cuts are anticipated to occur by the end of this
The layoffs are part of the company's efforts to reorganize its
business. Earlier, in October last year, the Zurich-based bank
planned to return to its private banking roots as tough capital
regulations made it difficult for the company to incur profits
With UBS facing crises since the financial meltdown, besides
incurring trading losses and outrage worth billions of dollars,
the overhauling measures were aimed at developing its core
businesses and downsizing the troubled segments. The layoffs,
which were designed by Chief Executive Sergio Ermotti, are aimed
to decrease risk-weighted assets and lessen the complexity of the
company's investment banking division.
The company had been trimming its investment bank since 2011
and intends to refocus on building its market-leading wealth
management and asset management business. Further, market sources
are of the opinion that UBS may restructure again.
The newly anticipated layoffs come on the back of challenging
operating environment in Europe. The sovereign debt crisis has
been a matter of concern and the company has resorted to such
restructuring measures to address issues like this.
Notably, UBS has been countering a faltering investment
banking business with its performance registering a sharp decline
over the past few quarters. The stressed environment and stricter
capital norms have prompted the company to chalk out plans for
rightsizing its business and trim its workforce.
CREDIT SUISSE (CS): Free Stock Analysis
UBS AG (UBS): Free Stock Analysis Report
To read this article on Zacks.com click here.
Another Swiss bank sailing in the same boat is
Credit Suisse Group
), which announced 300 job cuts in Switzerland. The layoffs are a
part of Credit Suisse's strategy to achieve CHF 4.0 billion ($4.2
billion) in cost savings by 2015. The streamlining initiatives
also involved combining the bank's retail and private banking
divisions in Switzerland from January 2013, which will result in
reduced headcount. The company anticipates the strategy to lead
to cost savings of CHF 50 million ($53 million).
With a bleak near-term outlook of an economic recovery, banks
have been progressively adopting rigorous cost-cutting
initiatives to maintain a sound capital buffer in order to
withstand any financial crisis.
Overall, until revenue generation revives, a worsening
cost-to-income ratio will continue to force many more banks to
reduce their costs through retrenchments, since they need to
enhance profitability in order to boost capital ratios.
Given the stressed operating environment, we believe that any
considerable improvement in the earnings of UBS would remain
elusive in the upcoming quarters. However, prudent business model
changes can lead to improvement in efficiency and reinforce its
UBS currently retains a Zacks #3 Rank, which translates into a
short-term Hold rating.