UBS, the embattled Swiss financial giant, has announced 5,500 job losses as the bank's woes continue to take a toll on its core wealth management business.
The cuts, which total about 7 per cent of the bank's workforce, include about 2,600 at the investment banking business that has plunged UBS into turmoil.
The investment banking cuts will be compulsory but UBS said it hoped other reductions could be made through unforced departures and moving people to other jobs. Casualties in London are said to number fewer than 700. The reductions come on top of 1,500 investment-banking job cuts already made.
UBS is the biggest casualty of the credit crunch among major European banks. Massive writedowns of more than $37bn (£18.8bn) have cost the jobs of its chief executive, Peter Wuffli, and the chairman, Marcel Ospel. The bank has raised about 39bn Swiss francs (£18.8bn) in capital to reassure wealthy clients that it is a safe institution.
UBS said its tier-one capital ratio at the end of the first quarter was a strong 11.8 per cent, and that it did not need to raise more capital. But its problems appeared to deter wealthy clients from giving it business.
Net new money at UBS's wealth management business was SFr5.6bn. But clients in Switzerland, where confidence has been rocked by the bank's ills, withdrew a net SFr1.9bn in the first quarter. Swiss business banking and global asset management had SFr18.4bn of outflows. The bank said that its performance was affected by general market conditions such as the weak dollar and lower wealth generation.
UBS announced a deal with BlackRock, the US asset manager, to sell $15bn of mortgage securities in what it said was a sign that the market for distressed assets was recovering.
"The same is true for UBS as for the entire sector: the worst is likely over," said analysts at Wegelin, the Swiss bank. "However, there is little momentum for the future. Even if job cuts are able to lower costs, the current outlook is anything but rosy."
UBS reported a first-quarter loss of SFr11.535bn, slightly below analysts' expectations. The shares closed down 4.5 per cent at SFr35.22.
In a further blow to Swiss financial services, Swiss Re, the world's biggest reinsurer, made fresh credit write-downs of SFr819m. Swiss Re has been hit hard by the credit crisis, notching up write-downs at its financial services unit, which creates products to transfer risk to capital markets.
Top banker held in US tax probe
The head of UBS's wealth management business for the Americas, Martin Liechti, was detained as part of a tax fraud investigation when he passed through Miami airport last month. The Department of Justice is looking into whether UBS helped its private clients to hide investments outside the US and illegally avoid US taxes. Mr Liechti, who is based in Zurich, has been told not to leave the US because he is a "material witness" to the investigation. UBS declined to confirm that the person detained was Mr Liechti. In a statement last night, the bank said: "Our understanding is that the respective employee, who has not been charged with any wrongdoing by the US government, will remain in the US pending discussions with the authorities regarding reso-lution of his status as a witness."