UBS shares jump on expected radical overhaul

Mon Oct 29, 2012 6:08am EDT
 
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By Emma Thomasson

ZURICH (Reuters) - Shares in UBS UBS.VX jumped more than 5 percent on Monday after media reports that the Swiss bank will announce cuts of up to 10,000 jobs and split off of its fixed-income operations into a separate division to be ultimately wound down.

UBS Chief Executive Sergio Ermotti is expected to announce the radical restructuring along with third-quarter earnings on Tuesday, but news of the plans started leaking late on Friday evening.

"The changes being discussed in the media, if true, would represent a transformational change for UBS," said analysts at Espirito Santo Investment Bank in a note to clients.

"It is not just a additional cost cutting exercise at the margin, but a strategy that would enable the bank to return much more capital to shareholders and/or significantly increase the capital ratios."

Shares rose 5.2 percent to 12.87 francs by 0833 GMT - their highest level since March - compared with 0.2 percent weaker European banking index .

The expected cuts will add to the tens of thousands of jobs the financial sector has shed globally since the financial crisis of 2008.

"If UBS does take radical action, we would expect this to kick off further industry restructuring," Citi analysts said.

A source familiar with the matter told Reuters on Friday Switzerland's biggest bank is expected to make the cuts across the firm globally, but the bulk of the losses are likely to occur in its hard-hit trading and investment banking areas.   Continued...

 
The company's logo is seen at an office building of Swiss bank UBS in Basel October 28, 2012. REUTERS/Arnd Wiegmann