UBS To Sell Mortage Assets, Cut Jobs
As First-Quarter Loss Nearly $11 Billion
By KATHARINA BART
May 6, 2008 4:49 a.m.
ZURICH -- UBS AG said Tuesday it would sell $15 billion in mortgage assets to BlackRock Inc. and slash 5,500 jobs by the middle of next year, moves meant to restructure the Swiss giant's troubled investment bank.
The Zurich-based bank will sell $15 billion -- with a nominal value of $22 billion -- in Alt-A and subprime assets to Blackrock, which will manage the holdings in a fund for distressed securities. Alt-A assets are considered slightly less risky than subprime loans.
The Zurich bank said it will ax 2,600 investment banking jobs, mainly in London and New York, after write-downs on dud mortgage securities totaling more than $37 billion. The remainder of the jobs will be cut through natural attrition across the bank's units, UBS said.
UBS, which is whittling down its mortgage holdings, said it will continue efforts to offload the sizable book of distressed assets it still holds after the Blackrock deal to stem further damage from write-downs.
"We clearly see investors coming to the market, which we view in itself as some strong support for current price and valuation levels," UBS Chief Executive Marcel Rohner told a conference call.
Meanwhile, UBS said it swung to a first-quarter net loss of 11.54 billion Swiss francs ($10.99 billion) after a 3.03 billion francs net profit in the year-earlier period.
In its outlook, UBS cautioned that market conditions remain tough, but indicated that it wouldn't seek to raise more capital after two massive injections of funds earlier this year.
"UBS's first-quarter results reflect the underlying franchise deterioration in wealth management and investment banking," JPMorgan analyst Kian Abouhossein wrote in a note to investors.
UBS shares slid in early trading, recently down 4.3% at 35.28 francs, giving the bank a market capitalization of over $75 billion. UBS shares have lost 26% so far this year, underperforming by far the Dow Jones Stoxx 600 bank index, which has edged 8.3% lower in the same period.
The major losses and subprime write-downs have led UBS to rethink its investment bank, clamping down on risk, shrinking its balance sheet, and abandoning some of the high-stakes areas such as proprietary trading.
UBS's fixed-income arm will be hardest hit by layoffs of roughly 26% of staff, while other, less-risky areas such as corporate finance and equities will be trimmed by an average of 9%. By contrast, newer areas that UBS has only recently tiptoed into, such as commodities, will see modest cuts, investment banking chief Jerker Johansson said.
Mr. Johansson also said the bank plans to shut its municipal-finance business if it fails to find a buyer. That business employs about 300 people and brings in about $200 million in revenue annually, a person familiar with the situation earlier told The Wall Street Journal. It nonetheless remains one of the most active municipal-finance arrangers in the U.S. market.
The planned moves were viewed by some analysts as too modest compared with UBS's Wall Street rivals, where planned job cuts run as high as 10% of bank staff. "It seems that UBS simply does not realize to which extent its franchise has been damaged by the investment bank," Peter Thorne, London-based analyst with independent broker Helvea, said.
The Swiss bank, which has swept its management ranks in recent months over the losses, has come under fire from activist shareholder Olivant Advisers Ltd. Olivant, a 1.1% shareholder, is urging UBS to consider asset disposals or a split-up to protect its flagship private bank.
At the private bank, which caters to the financial needs of wealthy individuals, inflows of fresh funds slowed dramatically. While the private bank garnered 5.6 billion francs in fresh funds -- a closely watched gauge of future business -- the bank overall posted outflows of 12.8 billion francs, as money left both the asset management and business bank units.
The fresh funds are likely to disappoint investors, who are accustomed to healthy inflows for UBS. The bank also compares unfavorably to rivals such as Credit Suisse Group, where the private bank's intake held up in the first quarter despite a net loss.
UBS has reduced its subprime and mortgage holdings in recent quarters.
At the end of March, the bank held $15.65 billion in subprime securities, roughly half of the year-end level. Alt-A securities were trimmed to $17.1 billion from $26.67 billion, and commercial real estate to $6.33 billion from $7.78 billion. A spokesman for UBS declined to update the figures to account for the BlackRock deal. |
发表于 2008-5-6 16:53:43
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