Shareholders win in UBS overhaul
Its job cuts and exit from investment intensive operations will free up more capital
UBS's decision to cut as many as 10,000 jobs and retreat from capital-intensive trading businesses will help position Switzerland's largest bank to return more funds to shareholders.
UBS intends to split and wind down much of its fixed-income operations, reducing risk-weighted assets by an additional 100 billion Swiss francs (HK$829 billion), said a person with knowledge of the matter who requested anonymity because the plans are private.
The reorganisation stands to help Zurich-based UBS meet its capital requirements faster than it would otherwise.
Chief executive Sergio Ermotti is overhauling the bank as Swiss regulators pressure UBS and Credit Suisse Group to boost capital and scale back trading and investment-banking operations.
Ermotti, 52, said in July that once the bank reaches its capital targets under Basel III rules, UBS plans to "implement a policy of returning capital to our shareholders in different forms". The bank paid its first cash dividend in five years for 2011, amounting to 10 centimes a share.
"UBS is going back to its roots," said Kian Abouhossein, a London-based analyst at JP Morgan Chase. "UBS is in fact the easiest restructuring story besides Credit Suisse by closing most of fixed income, cutting back-office costs, freeing up capital and becoming even more wealthmanagement geared."
The additional cuts would leave the investment bank with less than 35 billion francs in risk-weighted assets and UBS as a whole with less than 140 billion francs, based on targets the company disclosed for 2016.