Hiring spree takes the shine off UBS

Shares in UBS, the world's largest money manager, fell as much as 3 per cent yesterday as the company revealed that a sharp increase in costs in its investment banking division had taken the shine off a strong year of new business.

Publishing its 2006 results, the Swiss group revealed it had increased its headcount by more than 20 per cent to almost 22,000 in its investment banking arm, helping to raise the division's costs by some 18 per cent for the year. Income in the division rose by just 19 per cent.

In total, UBS took on an extra 8,500 staff in 2006. However, the group reassured investors that the intake over the coming year would be much lower.

Commenting on the rise in costs, Clive Standish, the company's chief financial officer, said: "We are acutely aware of the importance of extra resources in areas that generate or support increased revenues, and making sure we do not allow any part of our business to develop inefficient habits."

Overall, the company still reported record net profits of 12.3bn Swiss francs (£5.1bn), and remained upbeat about long-term prospects. However, the group conceded that investors may be more sensitive to political or economic shocks in the short-term, which could affect its performance. Nevertheless, the bank said it had begun 2007 "on a positive note, with a strong deal pipeline and continued investor confidence and activity".