Oct. 20 (Bloomberg) -- UBS AG, Switzerland’s largest bank, may cut about 1,700 more jobs at the investment bank as it shrinks the fixed-income business, JPMorgan Chase & Co. analysts led by Kian Abouhossein said.
“Investors would welcome a strategy aimed at shrinking UBS’s investment bank division and aligning it to mainly support the private banking franchise,” the analysts said in a note today. “We would expect the restructured investment bank to consume materially less capital with improved returns for the investment bank and the group.”
The bank could reduce risk-weighted assets in the fixed- income business by 70 billion Swiss francs ($77.4 billion), freeing up about 7 billion francs of capital, the analysts estimated. The job cuts, representing about 11 percent of total headcount at the investment bank, would be on top of the announced reductions of about 1,575 positions, they said.
Zurich-based UBS plans to reorganize the investment bank to focus on “advisory, capital markets and client flow and solutions businesses,” making the unit “less complex,” Chief Financial Officer Tom Naratil said at an investor presentation in London on Oct. 4. The unit will aim to boost return on equity as UBS reallocates more shareholders’ funds toward wealth and asset management, Naratil said. The bank plans to explain its strategy to investors on Nov. 17. The Swiss bank may shrink its rates and structured credit businesses to one third of their current size, exit the commodities business and slim the credit trading unit by about 20 percent, the JPMorgan analysts, who have an “overweight” rating on the bank, estimated. UBS is unlikely to seek reorganization of its equities business, they said.
UBS said last month it suffered a $2.3 billion loss from unauthorized trading in stock index futures at its investment bank. The trading losses have led to the departures of Chief Executive Officer Oswald Gruebel and the co-heads of global equities, Francois Gouws and Yassine Bouhara, as well as the suspension of a number of front office staff.
Kweku Adoboli, the trader accused of causing the loss, goes before a London judge today and may enter a plea before his case is transferred to a higher criminal court.
--Editors: Frank Connelly, Edward Evans
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