It was supposed to have finished last year, but this doesn't seem to have happened.
In 2010, UBS confessed to having hired hundreds of senior investment bankers. Then it said it was focusing on cost control. But in the first quarter of 2011, its latest results show headcount in the investment bank increased another 5%.
This meant the addition of 768 people, at a time when UBS was making redundancies, meaning hiring was even higher.
Who were all these new recruits?
UBS is known to have been hiring in equity derivatives under Yassine Bouhara, but is said to be mostly interested in recruiting former Deutsche bankers without them any paying guarantees. Last week, for example, it splashed out on an entire equities-focused structured products boutique, plus 22 people, most of them former employees of DB.
UBS has also been revamping FX and has declared an intention of substantially boosting its headcount in Asia Pac.
However, in today's conference call, CFO John Cryan said most of the hiring was actually in 'control functions' as the bank attempts to avoid a rerun of 2007/2008.
UBS is best in class
If UBS comes knocking, is it safe to open the door?
UBS's first quarter results were good. As analysts at Bernstein Research point out, revenue at the investment bank was just 9% below Q1 2010, which amounts to a 4% increase in euro terms. This compares to a 25% decrease at Citigroup, a 22% decrease at BAML and a 7% decrease at Goldman Sachs.
UBS's investment bank is miraculously on a par with the best in class - JPMorgan - where Q1 revenues increased 1% y-o-y.
Even fixed income, currencies and commodities did well - despite suggestions UBS should pull back from it - revenues were down 3%, versus 19% for the industry as a whole.
And yet. This may not mean you should rush to UBS.
· Firstly, it doesn't like paying guarantees any more.
· Secondly, it paid a lot of zero bonuses last year.
· Thirdly, it seems to be cutting pay for 2011: pay per head was CHF106k in the first quarter, down 13% on Q1 2010.
· Fourthly, with first quarter investment banking profit down 30% year-on-year to CHF835m, UBS looks no closer to attaining its aim of CHF6bn in annual profits by 2014. This being so, maybe it will need to cut costs.
· Fifthly, with FICC revenues at CHF1.8bn for the quarter, even after reallocating some commodities revenues, UBS's annual FICC revenue target of CHF8bn looks more attainable, but still challenging - particularly given FICC revenues typically decline as the year progresses. Cryan acknowledged today that the costs in FICC are predicated on CHF8bn of revenues annually, implying cuts may be necessary if targets aren't met.
· Sixthly, UBS's comparatively strong FICC results could really attributed to increased risk taking. VaR in the investment bank rose 40% year-on-year in Q1.
· Seventhly, costs are looking off. The cost income ratio in the investment bank was 75.8% in the first quarter, up from 71.5% last year. At a time when cost control is supposed to be the focus, this doesn't look good.
· Eighthly, return on equity in the investment bank is not looking good. It was 11.5% last quarter, versus 19.8% the year before.
· Ninthly, risk weighted assets are being capped at the level of Q1, which might make it difficult for UBS to keep up with other banks in future.
· Lastly: everything about UBS's results suggests a necessity for cost cutting. Quite why it continues to hire in such big numbers isn't entirely clear.