UBS to trim securities jobs as Ermotti cuts costs

BLOOMBERG

UBS Group AG is trimming some positions at the investment bank as part of a plan to reduce costs across the business in response to a revenue slump, according to people with knowledge of the situation.
At least a dozen London-based employees in the securities unit lost their jobs this week, said the people, declining to be identified because the matter remains private. Positions were eliminated in equities, debt capital markets, leveraged finance and real estate, they said. A spokesman for the Zurich-based company declined to comment.
Switzerland’s biggest bank, led by Sergio Ermotti, signalled earlier this month that it’s looking for ways to cut costs further when reporting a 64 percent drop in first-quarter profit. The securities unit had the weakest earnings since the global financial crisis in that period, as trading revenue plunged by a quarter.
“It’s clear that all banks are under pressure,” said Peter Casanova, a Zurich-based analyst at Kepler Cheuvreux who has a hold recommendation on UBS shares. “It’s management’s duty to perhaps cut a little deeper than just the usual pruning. This makes sense.”
UBS has defined “specific front-to-back initiatives that we will now implement” to achieve our net 2.1 billion franc ($2.1 billion) savings target by 2017, Ermotti told analysts earlier this month. The bank is on track to cut costs by 1.4 billion francs by the end of June under a plan announced in 2014, he said.
UBS’s shares rose 1.6 percent to 14.81 Swiss francs in Zurich trading. That helped pare the bank’s decline this year to 24 percent, compared to 20 percent at the Bloomberg Europe Banks and Financial Services Index.
Andrea Orcel, who heads the securities unit, said in a Bloomberg Television interview with Erik Schatzker in April that investors are questioning investment bank’s models, strategies, business practices and returns, with the industry going through a “seismic change.”
Global investment banks’ second-quarter revenue is on course to decline 24 percent, with the underwriting and equities businesses facing the biggest drops, analysts at JPMorgan Chase & Co. wrote in a note to clients. Advisory and trading revenue at UBS will probably drop more, or 28 percent, the analysts wrote.
Securities firms are reviewing how to reduce expenses amid the decline in trading and dealmaking. BNP Paribas SA, France’s biggest lender, is cutting 233 investment-banking jobs in London, a person with knowledge of the plan said Wednesday. Goldman Sachs is also undertaking firm’s biggest cost-reduction push in years.
“We could go a lot lower if we weren’t investing so much right now but I still think the cost-to-income ratio will decrease because it’s such a scalable business,” he said. The ratio will decline and “trend toward 0.40 within a year or so.”
Collector, which calls itself “a technology company with a bank license,” was founded in 1999 and listed on the Stockholm stock exchange last year. Since the June initial public offering, the stock has more than doubled. The shares gained as much as 1.9 percent to 133.5 kronor in Stockholm trading on Friday, their steepest intraday gain since May 9, and traded 1.7 percent higher as of 10:57 a.m. local time.
Collector reported a 30 percent increase in first-quarter total income while profit gained 56 percent. The CEO is confident that the historical trend with organic sales growth of 30 percent will continue.
“Right now we have two products that have a strong, financial development — real estate loans on the corporate side and consumer loans on the private side,” Alexandersson said. “But within less than a year or so, I see other growth engines. Then it will be payments solutions on the private side and factoring and credit on the corporate side, and that shift will happen quickly.”