UBS To Cut 10,000 Jobs, Workers Irate [UPDATE]
GENEVA -- Swiss banking giant UBS AG is to cut as many as 10,000 employees, or some 15 percent of its staff, to drastically shrink its ailing investment bank.
The news of the layoffs came as Switzerland's biggest bank posted another big loss for the third quarter. It said Tuesday that the job cuts are part of a strategy to shore up profits.
As a result, UBS said that it needs to reduce its headcount to "around 54,000" by 2015, down from its current 64,000 employees in 57 countries.
Some 7,500 jobs are to be cut mainly in London and the United States, where UBS has a prominent building and trading operations in Stamford, Conn., near New York City. The other 2,500 cuts are to be in Switzerland.
UPDATE: Tuesday, 2:40 p.m. -- Some UBS staffers were irate as dozens learned of the layoffs only when they showed up to work and were stopped from entering the bank's London offices Tuesday, according to Reuters.
They found their employee cards were no longer working and were then "escorted" to human resources, where they received their personal items in a bag and a letter telling them they'd have two weeks paid leave. Reuters' report said employees took to social media to vent. According to Reuters:
"Chafing at their treatment, several tweeters revived 'U've Been Sacked,' an invented acronym for UBS which circulated in 1998 after the bank fired hundreds of staff following the merger of the two big Swiss banks which formed today's UBS."
The announcement of the job cuts came as the Zurich-based bank posted a loss of 2.17 billion Swiss francs ($2.31 billion) in the third quarter, in contrast to last year' equivalent net profit of 1.02 billion Swiss francs.
UBS blamed the loss on a 3.1 billion francs charge at the investment bank and an 863 million francs hit linked to an accounting rule on how banks must value their debt.
Banks can post gains if the value of their debt falls, because it would theoretically become cheaper for the bank to repurchase that debt. But the rule also says that when a bank's debt increases, it must take a write-down, because it would theoretically have to pay more to buy back its own debt on the open market.
In what it called "a significant acceleration" in its transformation, the bank said it would sharpen its focus on the investment bank and appoint a new executive, Andrea Orcel, formerly of Bank of America Corp., to lead it. The current co-head of the investment bank, Carsten Kengeter, is stepping down from the group's executive board to unwind the non-core assets.
UBS said that it also plans to save 3.4 billion francs in additional costs through 2015, but that the reorganization will result in restructuring charges of 3.3 billion francs over the next three years, including about a half-billion francs in the fourth quarter.
UBS CEO Sergio Ermotti said the investment unit, which has been hit by a series of costly blunders in recent years, will "continue to be a significant global player in its core businesses."
But tighter industry-wide requirements for banks to increase their capital cushion also have hurt profitability as banks have less cash to invest.
"It can't get better than this point for us to act," he told reporters.
Ermotti, who took over in November after the discovery of unauthorized trading last year, has been downsizing the investment bank to meet stricter capital requirements and shrinking profits due largely to Europe's sovereign debt crisis.
Former UBS trader Kweku Adoboli has been facing trial in London this month on charges of committing fraud that cost the bank $2.3 billion. He has told the jury that the losses came after senior traders persuaded him to change from a bearish to a bullish point of view in July 2011.
But the bank also has been under fire on other fronts. In 2008, it was forced to seek a bailout from the Swiss government when it was hard hit by the financial crisis and its fixed-income unit had more than $50 billion in losses.
UBS is one of several global banks being investigated in the U.S. and other countries for alleged rigging of benchmark interest rates known as Libor, or London Interbank Offered Rate. In April, Ermotti said Switzerland's tax disputes with the United States and some European nations are "an economic war" putting 20,000 jobs at risk.
Switzerland has been trying to shed its image as a tax haven, signing deals with the United States, Germany and Britain to provide greater assistance to foreign tax authorities seeking information on their citizens' accounts in the Alpine nation.
But the tax agreements have drawn fire from Switzerland's nationalist People's Party, which won more than a quarter of the vote in last year's general election, with some lawmakers saying they will try to block the treaties through referendums.
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