Swiss bank UBS said it would resume dividend payments as it slashes risky assets in its scandal-hit investment bank by almost half in a shift of focus back to the core business of managing the assets of the world’s wealthy.
At an annual investor event, UBS cut its 2013 return-on-equity target to 12 per cent to 17 per cent from the 15 per cent to 20 per cent it had abandoned in July in the face of tough new capital rules and turbulent markets in recent months.
“We have chosen to substantially reduce the risk profile of the bank by exiting and downsizing businesses which are not value added to our client franchise or deliver unattractive risk-adjusted returns,” new UBS boss Sergio Ermotti said.
Mr. Ermotti, who took charge on an interim basis after Oswald Gruebel quit in September over the bank’s $2-billion (U.S.) trading scandal, was made permanent boss on Tuesday.
UBS said its investment bank staff of 18,000 would be cut to 16,500 by the end of 2013 and to 16,000 by the end of 2016. A spokesman said that meant 400 more jobs would go on top of 3,500 cuts discussed in August – some 5 per cent of its workforce. A spokeswoman said most of the cuts would be achieved by attrition and restructuring, rather than redundancies.
UBS will slash by almost 50 per cent investment bank risk-weighted assets of 300-billion Swiss francs ($326-billion) by 2016.
The shift relegates the investment bank to a provider of services to the private bank, which caters to the financial needs of the wealthy.
Like others in the industry, UBS is being forced to slash riskier assets ahead of a glut of tough new capital regulations that will make some businesses, particularly in fixed income, too expensive.
Banks worldwide are shedding thousands of jobs as the rules aimed at shielding them from future financial crises compound the impact of a tough trading environment.
UBS said it would propose a dividend of 0.10 francs per share for 2011 and a progressive capital return program thereafter.
The bank, which had started to restore client confidence after a 2008 government bailout following more than $50-billion in writedowns on illiquid securities, has not paid out to shareholders since 2007, and its last cash dividend was in 2006, when it paid out 2.2 francs a share.
Massive losses in the financial crisis forced UBS to stop dividend payments as it sought to rebuild capital.
UBS also said it planned to issue non-dilutive loss-absorbing debt qualifying as capital, without giving more details.
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