Swiss bank UBS reports 1Q net loss $11 billion
ZURICH, Switzerland—Swiss bank UBS AG, hard hit by the U.S. subprime crisis, reported a net loss Tuesday of 11.5 billion Swiss francs (US$10.97 billion; euro7.1 billion) for the first quarter and announced 5,500 job cuts.
The loss compares with a net profit of 3 billion francs in the same period last year. The company also said it would unload US$15 billion in subprime and other mortgage-based securities from its portfolio.
UBS shares dropped 4.8 percent to 35.10 francs (US$33.36; euro21.58) on the Zurich exchange.
The bank warned investors last month to expect net losses of 12 billion Swiss francs (US$11.42 billion; euro7.37 billion) for the first three months of the year after writing down about US$19 billion (euro12 billion) on U.S. real estate and related credit positions in the period.
Switzerland's largest bank said it will cut 2,600 jobs in its investment banking arm -- blamed for the majority of failures that led to the record writedowns of US$37.4 billion (euro23.65 billion) since last summer. Redundancies at the investment bank will be concentrated in Britain and the United States.
A further 2,900 jobs will go in other parts of the business, mostly through attrition, bringing the total number of posts cut by mid-2009 to 5,500 overall.
UBS has been struggling to regain investor confidence since posting a series of heavy losses that prompted shareholders to demand radical action to turn the business around.
Last month, shareholders approved the appointment of a new chairman and a capital increase of 15 billion francs (US$14.9 billion; euro9.35 billion) in the hope of turning the page on the bank's historic loss. It was the second capital hike after UBS raised 13 billion francs earlier this year from a Singapore government fund and an unidentified Middle East investor.
On Tuesday, UBS said it has reduced its exposure to subprime-related assets by 60 percent 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 US$15 billion (euro9.7 billion).
The bank also addressed the continued ebb in confidence from banking clients, particularly in its home market Switzerland.
UBS said it suffered a net outflow of 12.8 billion francs (US$12.17 billion; euro7.87 billion) in the quarter, compared with a net inflow of 52.8 billion in the same period last year. Swiss customers withdrew 1.9 billion francs (US$1.8 billion; euro1.16 billion), while the bank's global asset management division saw outflows of 16.5 billion francs (US$15.66 billion; euro10.13 billion).
The figures, which are a closely watched gauge of future revenue because they reflect general market conditions as well as customer confidence in the bank, were partly offset by inflows of 5.6 billion francs (US$5.31 billion; euro3.43 billion) in other units.
"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 were improving, but that 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.
He said UBS "will not rest until we have fully restored trust of our clients, of our shareholders and of our employees."
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Associated Press Writer Frank Jordans in Geneva contributed to this report.
