ZURICH–UBS AG, hard hit by the U.S. subprime crisis, reported a first-quarter loss of 11.5 billion Swiss francs or US$10.97 billion and said Tuesday it will slash almost seven per cent of its workforce.

The loss for Switzerland's largest bank compares with a profit of three billion francs in the same period last year. The company also said it would unload $15 billion in subprime and other mortgage-based securities from its portfolio.

UBS shares tumbled about five per cent.

The bank had warned investors last month to expect net losses of US$11.42 billion from the first three months of the year after writing down about $19 billion on U.S. real estate and related credit positions.

The bank said Tuesday it will cut 2,600 jobs in its investment banking arm – which took the blame for most of the bank's $37.4 billion in writedowns since last summer. Most of the job cuts will be in Britain and the U.S., the bank said.

UBS will eliminate 2,900 other jobs across the company, mostly through attrition, bringing the total number of posts cut by mid-2009 to 5,500. UBS has more than 83,800 employees worldwide.

UBS has struggled to regain investor confidence since a string of heavy losses prompted shareholders to demand radical changes at the traditionally staid bank.

Shareholders last month voted in a new chairman and approved a capital increase of 15 billion francs. Earlier this year, UBS raised 13 billion francs after seeking help from a Singapore government fund and an unidentified Middle East investor.

UBS said Tuesday it has reduced its exposure to subprime-related assets by 60 per cent since the third quarter of 2007.

"We can see tangible effects as a result of our initial responses to the losses," CEO Marcel Rohner said in a statement. ``While our exposure is still subject to swings in market conditions, we see market demand for these securities returning in certain areas and at the current level of valuations."

In a conference call with analysts, Rohner confirmed reports that UBS is selling parts of its subprime portfolio to U.S. asset manager BlackRock Inc. for $15 billion.

The bank also addressed the continued ebb in confidence from banking clients, particularly in its home market.

UBS said it suffered a net outflow of 12.8 billion francs in the quarter, compared with a net inflow of 52.8 billion in the same period last year.

"The outflows we have experienced in Switzerland, and reduced levels of inflows experienced elsewhere, are, no doubt, also a reflection of the reputational damage that we have sustained over recent months," chief financial officer Marco Suter said.

"The capital increase will certainly help in this regard, but we remain cautious as to the near-term net new money outlook."

UBS sent a letter to Swiss customers on Tuesday, acknowledging their "concern and disappointment" and reassuring them that "the bank remains strong" thanks to its solid capital base.

Rohner said recent data indicated that market conditions are improving, but the financial environment would likely remain difficult for the rest of the year.

"This will weigh on revenues in the coming quarters," he said, without elaborating.

ADVERTISEMENT

Iconocast is about learning and teaching without borders; we offer eMarketing, Internet Advertising, Internet Marketing, Search Engine Optimization, Search Engine Marketing, Online Branding, and eMarketing News Services.

Iconocast Home Page

Contact Iconocast

© 2003-07. ICONOCAST is a trademark of iconocast.com.