ZURICH – Swiss bank UBS AG said Tuesday it made a bigger than expected loss of CHF 8.1 billion (USD 7.57 billion) in the fourth quarter and would cut some 2,700 jobs to refocus on its home market.
The loss was bigger than analyst estimates, which foresaw a CHF 6.2 billion deficit.
In early 2008, Switzerland’s biggest bank reported a net profit of CHF 1.33 billion. The latest results bring its full-year loss to CHF 19.7 billion for 2008, the biggest in Swiss corporate history.
The figures would be worse if UBS did not benefit from a change in international accounting rules that improved fourth-quarter operating profits by CHF 3.4 billion before tax.
The rule change allows companies to value unstable assets at the price they would earn at maturity, rather than at the current market price, which can be lower.
Shares in UBS suffered a hit in early Zurich trading, falling by as much as 2.7 percent before rising sharply and settling at CHF 13.63, or about 5.7 percent higher than on Monday.
UBS chief executive Marcel Rohner expressed cautious optimism for 2009.
"We have worked hard to address our challenges and I can confidently say that we made substantial progress on all fronts", he said after at a presentation in Zurich.
"We had an encouraging start to the new year, but the environment will remain very difficult and volatile as the real economy has not seen the worst yet", Rohner added, noting that net new money inflows in January were positive.
This compared with net new money outflows of CHF 85.8 billion from its wealth and asset management businesses during the fourth quarter. Net new money is an important indicator of future business in the banking sector.
UBS said it plans to refocus on its core activity in Switzerland, its international wealth management franchise, and its global onshore business. To this end it will create two new business units. Wealth management and Swiss bank will be led by Franco Morra and Juerg Zeltner, while wealth management Americas will be led by Marten Hoekstra.
In a move that caused some concern among analysts, the bank said it will only take USD 39.1 billion of the USD 60 billion offered by the Swiss national bank to buy out toxic assets, unstable securities that are difficult or impossible to value because the market for them is reduced. Zuercher Kantonalbank said the decision increased UBS’s risk exposure.
UBS is also cutting 2,000 jobs at its loss-making investment banking unit, which was blamed for many of the bad investment choices that caused the bank to reduce the value of tens of billions of francs since mid-2007. By the end of 2009 the investment bank will cut its employees to 15,000 from 22,666 in the third quarter of 2007.
Rohner said a further 600 to 800 jobs in Switzerland will also be cut so that the bank can achieve its target of 75,000 employees by the end of 2009. The overall payroll at the end of the fourth quarter was 77,783.
UBS said it will pay staff bonuses of CHF 2.2 billion for 2009, a 78 percent drop compared to 2008. Further payments of CHF 1.6 billion will be delayed until 2010. The bank is involved in a fierce public debate over bonus payments since taking up a bailout offer from the Swiss government in 2008.
UBS already announced in November that its chief executive, chairman and the executive board will receive no bonus payments for 2008. Since then several former top officials also declined or returned million-dollar payments.
The bank said it remains the subject of several investigations, including a tax evasion probe in the United States. The Internal Revenue Service requested that UBS provide details on US clients suspected of tax evasion by hiding money in offshore accounts with the bank’s knowledge.
UBS warned investors that other countries might follow the US authorities and investigate the bank’s cross-border wealth management business.
"It is premature to speculate as to the scope or effect of any such reviews", UBS said.
[AP / Ernst E. Abegg / Expatica]