Don't panic: UBS is cutting just 8.9% of its investment banking headcount (for now), but only 300 of these are likely to hit London

This has, of course, been coming, but UBS has quietly announced this morning that it's planning on making 3,500 redundancies.

This number is smaller than the 5,000 that was bandied about before the bank's Q2 results, but unfortunately - as predicted - the investment bank is set to feel the majority of pain.

Around 45% of the job cuts will hit the investment bank, with 35% in wealth management and Swiss bank, 10% in asset management and 5% in its American wealth management business.

This means that 1,575 people will lose their job in the investment bank globally. Obviously, this is a significant figure, but with a headcount of 17,776 in the second quarter (an increase of 1,224 since the same point in 2010), it works out as a comparatively light culling of 8.9% and only 350 more people than it's hired over the last year.

UBS has yet to break out the cuts by region, but sources suggest that around 300 redundancies will hit the London operation, which is obviously primarily investment banking.

While this could be viewed with a relative sense of relief, it's questionable whether the cuts are deep enough. As we outlined yesterday, in order to bring the cost ratio down to levels seen in the first half of 2010, UBS needs to reduce staff in its investment bank by 2,808.

What's more, assuming based on first half compensation accrual that costs per employee would have come in at CHF383k this year, the cuts would amount to an annual cost saving of CHF603.2m in the investment bank.

Across the group, restructuring charges related to staff are expected to come in at CHF400m.

Headcount currently accounts for 75% of the cost base at UBS, and 39% of this is related to the investment bank. We estimated that of the CHF1.5-2bn the bank is looking to save over the next two to three years, CHF585m would come from the investment bank - or 1,250 people. Clearly, the cuts are deeper than we thought.

UBS said it would "continue to be vigilant in managing its cost base while remaining committed to investing in growth areas."

With the investment bank becoming an increasingly peripheral figure at UBS, costs accounting for over 80% of revenues in the first half and FICC trading in particular suffering, it's safe to say that expansion isn't on the cards any time soon and more cuts are not beyond the realms of possibility.