UBS Fires 500 of Its Investment Bankers

ZURICH, Switzerland -- UBS AG will fire 500 investment bankers to compensate for falling revenues, it said Wednesday, giving in to growing cost pressures on the industry caused by a drop in equity trading and merger activity.

UBS will cut some 3 percent of the roughly 16,000-member global workforce at its investment banking unit, which was until recently known as UBS Warburg. In Russia, the firm is Brunswick UBS.

A UBS spokesman in London did not rule out further job cuts at the bank should the market environment not improve.

"As a matter of course we review our cost structure and staffing needs and levels," spokesman David Walker said.

A three-year bear market, which has seen revenues from mergers, acquisitions and equity issues slump, has forced global investment banks to cull around 100,000 jobs in the past two years to shrink costs swollen by the tech and Internet boom.

Unlike its rivals, UBS has until now resisted major job cuts in its investment banking division and has instead shaved headcount in areas such as pan-European equity research.

While UBS has cut some investment banking jobs in selected areas, it has added staff in other areas. Its investment banking payroll has actually grown by a net 700 between 2000 and 2002.

"They generally have been a little bit less zealous in cutting than many other banks, mostly because they didn't have the same bull market build-up as others did," said Piers Brown, a banking analyst at Commerzbank Securities.

Even though UBS Group president Peter Wuffli said just one month ago he saw the first signs the bear market was ending, the latest job cuts at UBS took few market players by surprise.

UBS reported a 6 percent drop in investment banking revenues to 894 million Swiss francs ($685 million) in the first quarter.

UBS shares, which have risen more than 12 percent so far this year, fell 0.2 percent to 75.35 francs Wednesday, underperforming the Swiss market but in line with European peers.

"Markets may be turning but investment banking carries a very long cost tail," said Pictet banking analyst Peter Thorne. "While the worst may now be over, more restructuring remains on the cards."

Walker said UBS would continue to add staff in selected areas, such as in the United States where UBS wants to join the coveted group of "bulge bracket" top-tier investment banks and in the booming fixed-income area.

Wednesday's announcement of job cuts came just days after UBS dropped the name Warburg, one of the City of London's most prestigious investment banking brands with more than half a century of history, from its investment bank.

UBS last November decided it was switching to a single brand.

Headcount at the five largest investment banks peaked at around 450,000 in 2000 but has now dropped to about 350,000, according to estimates from one industry analyst.

The major U.S. firms -- Goldman Sachs, Morgan Stanley, Merrill Lynch and Lehman Brothers -- cut nearly 4,000 jobs in the first quarter.