UBS Provides Details on Investment-Bank Plan

Swiss bank UBS AG (NYSE: UBS) today provided details on its plans to downsize its investment banking unit. The Zurich-based bank said that it reduce the investment banking unit’s assets by half, exit from lagging businesses and focus on its huge private bank.

UBS, which is Switzerland’s largest bank, said that it will slash risk-weighted assets at its investment banking unit by half over the next five years. The unit has suffered since the financial crisis in 2008 and there has been increasing pressure on the bank to downsize the unit and focus more on the private banking unit.

As part of the downsizing of the investment banking unit, UBS will also eliminate about 2,000 jobs at the division. The bank plans to cut some 1,500 jobs by the end of 2013 and the remaining 500 jobs by 2016.

UBS also plans to reorganize the unit to serve up more products and services for its clients at the private banking division. UBS expects the move to raise its overall return on equity to 12%-17%.

The bank also said that it will pay a nominal dividend or 0.10 Swiss francs per share. UBS has not paid a dividend since 2006.

Over the last few years, UBS had shifted its focus to investment banking, however, the bank has struggled since the financial crisis of 2008. The bank’s latest plans to downsize bring an end to the efforts to build a global investment bank.

Sergio Ermotti, UBS’ CEO, said that investment banking will go back to the way it was in the 1990s. Ermotti said that UBS needs an investment bank that is more focused, less complex, less capital intensive and consistently profitable.

UBS shares on the NYSE fell today even though the bank’s plan to downsize could create significant value for shareholders in the next few years. UBS shares ended the day 2.61% lower at $11.21.

Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.