Feb. 9 (Bloomberg) -- UBS AG, the largest Swiss bank, doesn’t plan to abandon investment banking or replace the head of the securities unit, even as it eliminates more jobs, said two people with knowledge of the situation.
UBS’s decision to slash the bonus pool by 80 percent for 2008 fed speculation it might dismantle the investment bank or replace Jerker Johansson, its chief executive officer, said four bankers at the unit. The division’s future is still under review and the situation could change, said the people, who requested anonymity because the matter is private.
After the bonus cuts, employees at the investment bank are waiting to hear from management on the outlook for compensation in 2009 and on UBS’s commitment to the division. A lack of clarity on those points when the company publishes full-year results tomorrow may prompt departures among top bankers, the bankers said.
“One of the concerns people have is the commitment of their organization to the business,” said Jeanne Branthover, managing director in charge of financial services at Boyden Global Executive Search Ltd. in New York. “When things are uncertain, any kind of certainty makes employees, shareholders and the general public feel better.”
UBS, the European bank hardest hit by the global financial crisis, will probably report a record full-year loss tomorrow of almost 18 billion Swiss francs ($15.4 billion), according to analysts’ estimates. The bank, which received a $59.2 billion lifeline from Swiss authorities in October, said in a Jan. 21 memo to staff that it plans a fourth round of job reductions at the securities division to shrink the fixed-income unit.
Dominik von Arx, a London-based spokesman for UBS, declined to comment.
Propping Up Banks
UBS has said it will reduce risk-taking and the balance sheet, scale down the securities unit to complement wealth management and return to profitability this year. The company lowered assets by more than $700 billion since June 2007, announced 9,000 job cuts, and raised $32 billion from investors to replenish capital after $48.6 billion of losses and credit- market writedowns, according to data compiled by Bloomberg.
Financial institutions worldwide have amassed $1.08 trillion of losses and shed 269,000 jobs since the U.S. subprime mortgage market collapsed. Governments in countries including the U.S., Britain, France and Germany have also propped up banks to prevent a wider financial calamity.
UBS reduced its bonus pool to less to 2 billion francs from 9.5 billion francs a year earlier after receiving state funds to help move toxic assets off its balance sheet. The Swiss government wants UBS to move faster in reorganizing its unprofitable investment bank and in stemming client defections from its wealth management business, the world’s largest, a person familiar with the matter has said.
‘Radical Change’
The Swedish-born Johansson, 52, joined last March from New York-based Morgan Stanley, where he co-headed sales and trading. His goal for 4 billion francs in pretax profit at the investment bank, set last May, won’t be reached this year or next, according to analysts’ estimates.
Last month, the heads of the fixed-income unit, named late last year, announced that further “radical change” was needed to return that business to profitability. UBS plans to exit the real estate and securitization, and so-called exotic structured products businesses, Carsten Kengeter and Jeff Mayer said in the Jan. 21 memo.
Alex Wilmot-Sitwell and Rick Leaman, co-heads of investment banking, addressed managing directors worried about the future of the unit following the bonus cuts, said three bankers who listened to the presentation. The executives told bankers they shared their concerns about slumping bonuses and efforts to retain the best talent and would try to gain more clarity.
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