UBS revealed the devastating effect of the credit crunch yesterday as full-year losses hit Sfr19.7bn (£11bn) in 2008, the largest in Swiss corporate history.
The bank, whose services include managing wealthy clients' assets to corporate advisory, blamed the staggering losses, which were almost four times higher than in 2007, on "risk positions in the investment bank" as well as a series of one-off losses.
These includes the Sfr4.6bn deal with the Swiss National Bank, a Sfr1.6bn credit charge and Sfr700m restructuring of the investment bank.
UBS added that it has taken steps to cut costs, including slashing bonuses, axing 2,000 more employees and overhauling the business structure. Its chief executive, Marcel Rohner, said the bank had shelved its full-year dividend.
Mr Rohner remained upbeat after a quarter he described as the "worst environment ever for investment banking", and predicted a return to profit this year. "While we leave a bad year behind us, we can nevertheless report substantial progress," he said.
In the last three months of the year alone UBS lost Sfr8.1bn. The Swiss giant, which released its results the day before rival Credit Suisse, remains heavily exposed to leveraged finance and monolines, which contributed to a Sfr3.7bn loss.
The wealth management arm, the group's core business, saw investors continue to pull cash well into the fourth quarter. This led to total outflows for the year hitting Sfr123bn. Clients also pulled Sfr103bn from its asset management arm. However, the bank said so far this year net new money has turned positive at both divisions.
The group announced yesterday it was to overhaul its wealth management business. It has reorganised the group with a "new structure [that] refocuses UBS on its Swiss core businesses, on the large scale and strengths of its international wealth management franchise in Switzerland, and on the growth potential of its on-shore business globally".
The investment banking division suffered badly, but the group reaffirmed it was "core" to the business. This followed rumours it had been looking to sell.
UBS added that it would reduce the division's balance sheet and overall risk and cut staff to 15,000 this year, down from 17,171.
UBS talked of an "encouraging" start to the year, but warned that "financial market conditions remain fragile as company and household cash flows continue to deteriorate". It backed the measures taken by governments around the world to ease fiscal and monetary conditions, but said "our near-term outlook remains cautious".
The group said that in 2008 it had slashed costs by 22 per cent, with personnel expenses down more than a third, "primarily due to lower performance-related compensation, mainly in the investment bank". The bank cut staffing levels by 1,782 to 77,783 in the last quarter of the year, with most of the cuts coming in the investment bank. It has announced a total of 7,500 job cuts.Reuse content