UBS AG has announced plans to close down its fixed income (bonds investments) unit with the loss a staggering 10,000 jobs worldwide. The money and bond markets traditionally have always seen the largest daily investments, much larger than the stock and shares markets. UBS’ decision to move out of this sector is surprising, and devastating for the many thousands of fixed income professionals.
“Overall, I think it’s a good move to abandon activities which don’t earn anything and concentrate on those which create value for shareholders,” Rainer Skierka, analyst for Bank Sarasin.
UBS has decided that its future lies in servicing its private bank clients and the smaller investment bank, and not in the global money markets and bond markets. This will see most of its huge trading business closed down permanently. Both global economic slowdown and rogue traders have been cited as being the cause.
During the financial crisis UBS lost around $50 billion, and one rogue trader is thought to have lost the company a further $2.3 billion due to bad investments.
3 Year Cost Cutting Project
The closure of its fixed income investment business will take around 3 years to complete and is expected to save an additional CHF 3.4 billion.
For UBS fixed income investments are no longer a profitable area. New regulatory changes in recent years have severely reduced profit margins, making all investments risky.
Carsten Kengeter, who is currently jointly in charge of UBS’ investment bank will be managing the deconstruction of the fixed income business. Andrea Orcel will take on the role of running the remaining business which comprises of equities, foreign exchange trading, corporate advice, and precious metals trading.
15% Staff Cull
The closure of UBS’ fixed income business will result in a 15% reduction in its global staff, reducing total number of employees from 63,745 to around 54,000.
London will suffer many job losses, along with 2000 in Switzerland and the remainder in the USA.
The UBS website today is focusing on its planned future growth with the headline “UBS announces strategic acceleration from a position of strength“.
You can follow UBS shares and investment news on Reuters: http://www.reuters.com/finance/stocks/overview?symbol=UBSN.VX