Published November 17, 2011
The Swiss banking giant in August said it would reduce its workforce by 3,500 over the next two years in an effort to reduce costs, with a majority of those cuts being taken from its struggling investment bank.
There had been speculation that the company might have to cut even deeper after a $3.2 billion rogue trade in September cost the company millions and forced its CEO at the time, Oswald Gruebel, to resign.
The announcement came at a UBS investor day on Thursday and after the bank officially appointed Sergio Ermotti as its permanent chief executive, responsible for heading up the investment bank’s turnaround and refocusing the company.
Ermotti said the company will scale back the investment bank and report its results separately from the rest of the group. The unit will be more focused and less complex, carrying fewer risk-weighted assets and requiring less capital.
Also on Wednesday, the company’s chairman, Kaspar Villiger, said he would not run for re-election at the May 2012 annual investor meeting, saying the company needs to accelerate the planned leadership change at the highest levels of the bank.
Calling the unit “integral,” UBS said it will not sell its wealth management business, and will focus on both that group and its Swiss-based universal bank.
“We have chosen to substantially reduce the risk profile of the bank by exiting and downsizing businesses which are not value added to our client franchise or deliver unattractive risk-adjusted returns,” Ermotti said. “The Board and I are convinced that this strategy plays to our strengths and is focused firmly on the needs of our clients.”
Also a part of the growth strategy, UBS plans to generate a greater share of its profit from businesses that deliver “more consistent results,” while reducing risk and tightening its cost management.
Pending the successful execution of these plans, Ermotti says the company is confident it can deliver a return on equity between 12% and 17%.