UBS will lay off as many as 2,600 people from its investment bank over the remainder of this year, and will cut 2,900 more jobs elsewhere in the company by the middle of 2009.
The casualties include the Swiss bank's entire 300-person U.S. municipal bond department.
The cuts were outlined in the bank's first quarter results announcement, issued Tuesday. UBS AG reported a quarterly net loss of 11.5 billion Swiss francs ($11.6 billion at March 31 exchange rates), compared with a profit of 3.0 billion Swiss francs in the 2007 first quarter.
Alongside write-downs of mortgage-related holdings - which UBS pre-announced a month ago - and sharply lower revenue from stock and bond offerings and other deals, the release noted a few areas where business increased from a year earlier.
Pockets of Career Opportunity?
Those better-performing areas might represent pockets of career opportunity, or at least stability, for the time being. They included cash equities, prime brokerage, exchange-traded equity derivatives, interest-rate swaps and options, government bonds, foreign exchange and commodities trading.
The bank's loss was concentrated in the investment bank division, and specifically within its fixed income, currencies and commodities business unit. In line with an April 1 pre-announcement, that unit posted negative revenue of 19.1 billion Swiss francs ($19.2 billion at the March 31 exchange rate), driven by losses from U.S. residential and commercial mortgages and reference-linked notes. The release also cited write-downs from a widening list of usual fixed-income suspects: student loan asset-backed securities, leveraged loan commitments, and purchased bond insurance, along with realized losses from "disposals and the negotiated termination of deals."
Meanwhile, investment banking revenue tumbled 58 percent, capital markets revenue shrank 72 percent and advisory revenues fell 14 percent.
UBS said it expects to end 2008 with around 19,000 investment bank employees, a reduction of up to 2,600, with layoffs making up "the large majority." Firm-wide, the firm estimates it will have 5,500 fewer employees by mid-2009. Reductions outside of the investment bank will come "mainly through natural attrition and internal redeployment, although it will not be possible to avoid redundancies entirely," the firm said.
The bank will sell or close its municipal services business, according to reports in both Forbes and Bloomberg. The department arranged $7.6 billion of municipal bond sales in the first quarter, ranking third in the U.S. behind Citigroup and Lehman, according to Thomson Reuters data cited by Bloomberg. In the decade since buying Paine Webber, UBS regularly battled Citi for the top spot in muni underwriting volume.
A UBS spokesman told Bloomberg that some muni traders will transfer to the bank's wealth management division.
UBS said first-quarter personnel expenses declined 44 percent year-over-year due to staff reductions, lower bonus accruals and currency effects. The company said it employed 859 fewer full-time staff during the quarter than a year earlier.
"UBS expects this difficult environment to remain and be characterized by a continuing unfavorable global economic climate, deleveraging by institutional and private investors, slower wealth creation and lower trading and capital market activity. The impact will affect all of UBS's businesses and it requires the firm to manage costs, resources and capacity very actively," the release said.
Despite offering a gloomy outlook for economic and market conditions in coming quarters, Chief Executive Marcel Rohner saw progress in exiting from illiquid securities. "While our exposure is still subject to swings in market conditions, we see market demand for these securities returning in certain areas and at the current level of valuations," he said in the statement.