LONDON â€" UBS said on Tuesday that it planned to cut up to 10,000 jobs and enact further cost cuts in a major overhaul of its investment banking division as the Swiss firm announced a huge loss for the third quarter.
The Swiss bank posted a loss of 2.2 billion Swiss francs, or $2.3 billion, for the three months through Sept. 30, citing restructuring costs and charges connected to its own debt. It had recorded a 1 billion franc net profit in the similar period last year.
The major overhaul is an attempt by UBS to reduce its riskier operations and focus on its profitable wealth management businesses.
As part of its plan to pare back its investment banking unit, UBS, which is based in Zurich, said it would cut its work force up to 16 percent over the next two years, bringing it to 54,000 employees worldwide by 2015. The bank already had announced 3,500 job losses last year, which do not form part of the newly-announced layoffs.
“This decision has b een a difficult one,†UBS's chief executive, Sergio P. Ermotti, said in a statement. “Some reductions will result from natural attrition and we will take whatever measures we can to mitigate the overall effect.â€
The job cuts are part of additional 3.4 billion Swiss francs of annual cost cuts to be implemented by 2015. The new reductions, announced on Tuesday, will take UBS's planned annual cost savings to 5.4 billion francs over the same time period.
The announced changes would lead to the firm's so-called risk-weighted assets to fall below 200 billion francs by 2017, compared to the current level of more than 250 billion francs. The drop will reduce the bank's exposure to riskier financial assets.
UBS's investment banking division will see its risk-weighted assets fall 23 percent, to around 70 billion francs, over the same time period.
The bank said the cost savings would come primarily from its reduced investment banking operations, where the bank plans to eliminate most of its fixed income businesses because they had become unprofitable.
The reduced investment banking unit would focus on advisory services, research, equities, foreign exchange and precious metals, according to a company statement.
As part of its restructuring plans, UBS said it had incurred 3.1 billion francs of losses related to its investment banking business, as well as a further 863 million franc loss connected to charges on the value of its debt.
“We are now able to take further decisive action to transform the firm and position it for future success,†Mr. Ermotti of UBS said in a statement.
The Swiss bank said the major restructuring plans would continue to weigh on its profitability. The firm expects to book a further 500 million franc charge in the fourth quarter of the year, which would lead to a net loss over the period.
Europe's debt crisis and volatility in the world's financial markets will continue to weigh on earnings, the bank said, as clients remain cautious about investing their money.
“Failure to make progress on these key issues would make further improvements in prevailing market conditions unlikely and would thus generate headwinds for revenue growth, net interest margins and net new money,†UBS said.
Despite the restructuring charges, the Swiss firm said new inflows to its wealth management operations rose by 12 billion francs over the quarter. Pretax profit for its wealth management unit fell 32 percent, to 600 million francs, compared to the same period last year.
The firm's investment banking unit reported a 2.9 billion franc loss compared to a 650 million franc loss in the third quarter of last year. Pretax profit in UBS' retail and corporate fell 40 percent, to 409 million francs, over the same period.
The bank said its common equity Tier 1 ratio, a measure of a firm's ability to weather financial shocks, stood at 9.3 percent u nder the so-called Basel III rules. UBS plans to raise that figure to 11.5 percent by next year.
Andrea Orcel, who joined UBS last year from Bank of America Merrill Lynch, will lead the smaller investment banking division, while Carsten Kengeter, the current co-head of the unit, will step down from UBS's executive board to oversee the sale of the bank's unprofitable investment banking businesses and financial positions.
