The shake-up comes as the Swiss banking giant tries to make a break with its recent past that has been marked by a disastrous several years that have seen it battered by the global financial crisis and embroiled in disputes over client secrecy.
In trimming down the Investment banking business, the bank will slash more than 300 jobs over the next four years, in addition to the 1,500-plus job cuts it announced in August of this year.
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Many of the cuts are expected to come from investment banking attrition. The investment banking business will be reduced by nearly half, with the current CHF300 billion in risk-weighted assets cut by CHF145 billion.
As a result of the changes, the group’s capital is expected to rise to about 13%, well above the requirements of the stringent Basel III rules.
In an interview, newly appointed chief executive Sergio Ermotti suggested that rivals could follow UBS’s move to scale down the investment bank, in light of tougher regulations and a changed market environment. "We’re going back to the mid-1990s," he said.
The boom in investment banking of the last decade "was an anomaly. There is no way you can sustain that business model" in light of heavier regulations.
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By GlobalDataWith assets of nearly CHF1.4 trillion, UBS plans to extend its wealth management business with new leadership positions in Switzerland, Europe, Asia Pacific and the emerging markets, while continuing to build its American arm.
The Financial Times points out that the bank’s new strategy parallels to some extent that of other international banks and in particular Credit Suisse, but "the two Swiss groups differ from their big international rivals in their emphasis on private banking as the central and growing part of their business."
UBS rival Credit Suisse Group has pursued a somewhat similar strategy of late, but recently scaled back the revenue it is targeting from such cooperation.
UBS’s move thus may or may not yield the desired results, but given the prevailing economic volatility and ever increasing regulatory demands, WealthInsight believes that UBS’s decision to trim its investment banking business and turn its focus to its relatively safer wealth management business is a prudent one.
It will be interesting to see what strategy UBS adopts to resurrect its US wealth management division, which according to some media reports was close to being sold a few months back.
