Friday, January 18, 2008

UBS revamp after sub-prime losses

“Swiss Investment Bank UBS plans to shrink its investment banking business ...”

"I know that 2007 was a year that challenged and tested us all individually and collectively," UBS CEO Mr Rohner said.After huge losses caused by exposure to problems in the US sub-prime housing market. UBS makes further job cuts and scale back on its more-risky strategies, Marcel Rohner outlined in today's internal memo.
UBS has written off about $14bn (£7.1bn) in debts linked to sub-prime loans and has warned of further losses. The dramatic plans to streamline operations at UBS centre on the division responsible for its distressed mortgage-backed investments.

These holdings will be gradually wound up, as the no longer attractive sector they invested in has suffered badly.

Staffing levels in the division will significantly reduce, and the amount of capital the bank commits to that area of business will also shrink by two-thirds.

In an internal memo, seen by the BBC, Mr Rohner also said he wanted UBS to focus on its clients rather than on using the bank's capital to boost its profits.

Bond and currency trading business will also be restructured to cut costs and transfer capital to more profitable areas.

Tough times

The changes come as UBS struggles to better position itself after becoming one of the worst victims of the global credit squeeze.

Last July the firm layed off 1,500 jobs, sacked its chief exec Peter Wuffli and replaced him with his deputy Marcel Rohner. Like many of its troubled peers, UBS has turned to wealthy state-backed funds in the Middle and Far East for financial support.

Singapore's investment arm has bought shares in the bank for almost $10bn, while an unnamed Middle Eastern investor, thought to be the Oman government, has also taken a stake.

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