UBS set to exit fixed income, fire 10,000 bankers

Mon Oct 29, 2012 9:31pm EDT
 
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By Katharina Bart

ZURICH (Reuters) - UBS is expected to reveal plans on Tuesday to wind down its fixed income business and fire 10,000 bankers, with shareholders cheering one of the biggest bonfires of finance jobs since the implosion of Lehman Brothers in 2008.

The move will focus Zurich-based UBS around its private bank and a smaller investment bank, ditching much of the trading business that saw it lose $50 billion in the financial crisis and one rogue trader lose $2.3 billion last year.

Chief Executive Sergio Ermotti is expected to announce plans for a slimmer, less risky investment bank focused on equities, foreign exchange trading and giving corporate advice.

Investors are keen for details on how the Swiss bank will wind down the fixed income unit without incurring big losses. Employees complain they have been in a state of limbo after months of rumors of cuts.

"It's becoming like torture, especially for those that don't think they will be compatible with the new Orcel team," said one employee, referring to Andrea Orcel, a close ally of Ermotti from Bank of America who arrived in July and is expected to run the investment banking unit's remaining businesses.

Bankers were already anxiously awaiting news of an initial 400 job cuts set to hit this week, though that will likely be just the beginning of a cycle of layoffs that will hit those in fixed income trading the worst.

A smaller investment bank would leave UBS to focus on its private bank, which looks after the affairs of rich people. It is the second-largest operation of its kind in the world after Bank of America with $1.554 trillion in assets according to a compilation by Scorpio Partnership.

UBS was one of the banks hardest hit by the financial crisis when its fixed-income unit racked up more than $50 billion in losses after gorging on subprime securities, forcing it to seek a bailout from the Swiss government.   Continued...

 
A man walks in front of the office of Swiss bank UBS in the Bahnhofstrasse in Zurich August 10, 2012. REUTERS/Arnd Wiegmann