UBS to slash 10,000 jobs

Swiss banking giant UBS intends to cut nearly 10,000 jobs worldwide in a restructuring of its hard-hit investment bank, the group said on Tuesday, reporting that reorganization costs had pushed it deep into loss in the third quarter.

UBS to slash 10,000 jobs
UBS headquarters in Zurich (Photo: UBS)

The costs switched the Swiss bank's third-quarter results into a 2.2-billion franc ($2.36-billion) net loss compared to the 1 billion net profit it had reported during the July-September period last year.

"This decision has been a difficult one, particularly in a business such as ours that is all about its people," UBS chief executive Sergio Ermotti said in a statement, referring to the job cuts.

"Some reductions will result from natural attrition and we will take whatever measures we can to mitigate the overall effect," he said, vowing that "our people will be supported and treated with care."

The Zurich-based bank said that cuts in its overall staff numbers to about 54,000 by 2015 was a necessary part of a restructuring of its investment bank, including shedding some of its high-risk activities and basically withdrawing from the fixed income business which had burdened it with catastrophic losses during the 2008 "subprime" crisis.

UBS, which counted nearly 64,000 employees at the end of September, said the restructuring would save 5.4 billion francs ($5.8 billion) over the next three years.

UBS said in its earning statement it had taken a one-time charge of 3.1 billion francs linked to the restructuring and a debt-related charge of 863 million.

Before taxes, UBS said it was hit by a loss of 2.5 billion francs, but that adjusted for the impairment losses and a restructuring provision, it had registered a pre-tax profit of 1.4 billion.

Ermotti hailed the company's earnings, stressing that all the bank's activities had "delivered improved profitability in the third quarter," and that it was rolling out its strategy "well ahead of schedule."

"We are confident that the actions we are taking now will ensure the firm's long-term success in the fundamentally changed regulatory and economic environment and will deliver sustainable returns for our shareholders going forward," Ermotti said in a joint comment with UBS chairman Axel Weber.

The bank said it was withdrawing from lines of business "that do not meet their cost of capital sustainably or are in areas with high operational complexity or long tail risks likely to weigh on future returns."

UBS finance chief Tom Naratil told a conference call on Tuesday that the bank had "delivered a solid performance despite a challenging environment."

The bank expected to have to pay a further amount of about 500 million Swiss francs in restructuring charges in the fourth quarter, which is also expected to be in the red.

But Naratil stressed that despite the difficult economic environment, the bank had managed to raise a "record" amount of fresh capital, raising 7.7 billion francs from the Asia Pacific region, emerging markets and very wealthy clients.

In the fourth quarter, the bank said it expected to pull in more fresh capital despite the continued difficult climate.

As for dividend payments, which UBS started doing again last year after a four-year freeze, Naratil said "we continue to accrue for a dividend" in 2012, but did not specify if the bank would hand out some of its profits this year to shareholders.

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Switzerland’s UBS faces €3.7-billion fine as crucial court ruling looms

A Paris court will rule Wednesday on whether Swiss banking giant UBS illegally tried to convince French clients to hide billions of euros in Switzerland, charges which prompted prosecutors to seek a record €3.7-billion fine.

Switzerland's UBS faces €3.7-billion fine as crucial court ruling looms
UBS denies charges it helped French clients evade tax and says it will defend itself "vigorously". Photo: AFP

The trial opened last autumn after seven years of investigations, launched when several former employees came forward with claims of unlawful conduct. 

The move came as authorities across Europe cracked down on tax evasion and dubious banking practices in the wake of the global financial crisis which erupted in 2007.

The pressure eventually forced Switzerland to effectively end its tradition of ironclad bank secrecy, by joining more than 90 countries which agreed to automatically share more client account information among each other.

In the UBS case, French authorities determined that more than €10 billion had been kept from the eyes of tax officials between 2004 and 2012.

The National Financial Prosecutor's office urged a €3.7-billion ($4.2 billion) fine, the largest ever sought in France, saying the bank and its directors “were perfectly aware that they were breaking French law” by unlawfully soliciting clients and helping them evade French taxes.

They also sought a €15 million fine for UBS's French subsidiary, and fines of up to €500,000 for six top executives, including Raoul Weil, the former third-in-command at UBS, and Patrick de Fayet, formerly the second-ranking executive for its French operations.

In addition, lawyers for the French state, which is a plaintiff in the case, asked for €1.6 billion in damages.

UBS, which was ordered to post €1.1 billion in bail, has denied the charges and said its operations complied with Swiss law.

It also says that it was “unaware” that some French clients had failed to declare assets in Switzerland, and that prosecutors have not produced any proof, such as client names or account numbers, to back up their fraud claims.

The case is being closely watched by industry executives at a time when Paris and other European capitals are hoping to lure multinational banks from London as Brexit looms.

'Milk tickets'

UBS is accused of organising or inviting prospective clients to prestigious outings such as the French Open or luxury hunting retreats, where UBS's Swiss bankers would meet their “prospects” — something they were not allowed to do under French law.

UBS France directors then used notes called “milk tickets” to keep track of how many “milk cans” – amounts of money – were transferred to Swiss accounts.

They say the system was merely a way to balance out bonuses due to French bankers who were effectively losing a client to their Swiss peers, and the notes were later destroyed.

But investigators claim the “milk tickets” were proof that UBS had a parallel accounting system for keeping the transfers off its official books.

Only one “milk ticket” was found during the inquiry, prompting defence lawyers to argue there was no proof to justify claims of a massive fraud.

Yet prosecutors pointed to the roughly 3,700 French UBS clients who later took advantage of an amnesty offer to regularise their tax declarations with the French authorities.

UBS has been embroiled in a series of similar cases, most notably in the United States, where the authorities said the bank used Switzerland's banking secrecy laws to help rich clients avoid taxes.

In 2009 it paid $780 million to settle charges it helped thousands of American citizens hide money from the Internal Revenue Service, and agreed to turn over information on hundreds of clients, severely denting Switzerland's long tradition of shielding banking clients and their operations from prying eyes.

That case was also prompted by a former American UBS employee turned whistleblower, Bradley Birkenfeld, whose book “Lucifer's Banker: The Untold Story of How I Destroyed Swiss Bank Secrecy” was published in 2016.

Last November UBS was again sued by US authorities, who accuse the bank of misleading investors over the sale of mortgage-backed securities in 2006 and 2007, just before the financial crisis struck.

UBS has denied the charges and said it will defend itself “vigorously”.