UBS to cut 8,700 jobs as gloom deepens

Swiss bank targets 'long road to success' as it reports Sfr2bn losses in first quarter

UBS is to axe another 8,700 employees as it attempts to stabilise itself after suffering record losses last year. The Swiss bank's chief executive, Oswald Grübel, outlined the plan for the "long road back to success" at its annual meeting in Zurich yesterday, as it revealed losses of Sfr2bn (£1.1bn) in the first quarter.

In a speech to shareholders, Mr Grübel said: "Unfortunately I am not able, as yet, to offer you any good news. Instead I am forced to present you with another round of unsatisfactory performance figures and to announce further drastic measures."

He blamed the losses in the first three months of the year on pricing of illiquid risk positions, credit loss expenses and the value of assets it transferred to a fund controlled by the Swiss National Bank. In February, the bank posted full-year losses of Sfr19.7bn, the worst in Swiss corporate history.

Mr Grübel said UBS is planning to combat the losses by cutting costs by up to Sfr4bn by 2010. As part of the drive "major job cuts are unfortunately unavoidable," he added. The bank expects to slash the headcount worldwide from 76,200 in March to 67,500 next year. It has already cut more than 11,000 jobs since the start of the crunch.

UBS is currently reviewing which high-risk operations it should divest. "There will be cuts: Yes, our bank will become smaller. On the other hand, we will be able to focus more on our strengths," Mr Grübel added.

There was bad news at its private banking business, as more clients took money out than invested. The division saw a net outflow of Sfr23bn in the first three months of the year alone.

This was blamed on the reputational damage after a tax evasion investigation by the US Justice Department. The dispute with the US tax authority over the disclosure of further client names – nicknamed the John Doe summons – is still pending.

Mr Grübel said: "Although we have taken many important steps in recent months to stabilise our bank, the crisis is not yet over. We will therefore do what is necessary and implement further measures to immediately protect and strengthen our capital base."

The financial industry is undergoing profound change, he continued in his speech, saying it faced a "paradigm shift". He pointed to government influence over the industry after many have taken direct stakes in institutions.

UBS has benefited from state intervention, in October raising Sfr6bn from the government as well as agreeing a transfer of $60bn of distressed assets. "The banks themselves, including UBS, have only themselves to blame. The fact that Switzerland made a commitment to us was important," Mr Grübel said.

UBS made the surprise move to appoint Mr Grübel, who had worked at the bank's biggest rival, Credit Suisse, for almost 40 years, at the end of February. In a further changing of the guard, Peter Kurer, appointed chairman last year, yesterday told the AGM of his intention to stand down. He will be replaced by the former Swiss finance minister Kaspar Villiger.