UBS posts $17 billion loss and restructures

UBS yesterday posted a net loss of SFr19.7 billion ($16.8 billion) for 2008, up 375% from the 2007 loss of SFr5.2 billion, with the fourth-quarter shortfall alone coming to SFr8.1 billion.

"Losses were mainly due to negative revenues in the fixed income, currencies and commodities areas of the investment bank," said the Swiss bank in a written statement. During 2008, UBS managed to reduce operating expenses for the overall firm by 22%, primarily because its salary bill fell 36% to SFr16.2 billion on account of lower payouts in the investment bank.

The pre-tax loss in the investment banking division doubled to SFr33.7 billion last year from SFr16.7 in 2007, despite a reduction in personnel expenses to SFr4.9 billion from SFr11.3 billion.

UBS reiterated that investment banking remains a core business but added that it will be reducing its use of balance sheet and further reducing headcount to 15,000 by the end of 2009 from around 17,000 currently. UBS has already exited a number of fixed-income businesses including proprietary trading, some commodities businesses, real estate and securitisation as well as exotic structured products.

The Swiss bank let go of another 1,782 people during the fourth quarter of 2008, mostly in investment banking. This is marginally less than the 2,000 people it had announced it would reduce in early October last year.

Jerker Johansson, CEO of the investment bank, explained the bank's strategy in a written statement: "We are focusing on three businesses: our investment banking department and equities activities, with their very strong global franchises, as well as our client-facing fixed-income areas, including our world-class foreign exchange business."